Techonomics

What Disrupted the Indian IT Industry?

If

you lived in Bangalore in the 2000s and frequented any of its famous clubs or pubs, you would’ve most likely experienced this singularly most absurd of experiences. So, it was a fine (late) evening. You were sitting in a darkened pub, enjoying your beer and heavy metal, trying to catch the eye of the LBD-clad cutie a couple of tables away. As the evening advanced, Cradle of Filth merged into Metallica and faded into Rammstein, pitchers emptied, heads banged and great noise ensued. And then, when you thought that your efforts are finally about to pay off, it happens! Out of the (dark) blue, the music stops and the lights come on. A number of uniformed state policemen enter the place and ask everyone to go pack up and go home. No, you did not wake up from a dream. The time was double-two-double-five hours, and this was the Bangalore Police enforcing their once-upon-a-time notorious Cinderella rule that mandated all eateries in the city down shutters before the clock chimed eleven (ostensibly, to stop crime!) The party over, you left the place mostly high but never dry, though sometimes with a sense of empty, looking forward to continue the party at home. Yeah, the times were anti-climatic.

The 11 pm rule that single-handedly killed what was until then the legendary Bangalore nightlife is thankfully gone now. However, unnoticed by many, there was another announcement made somewhat more recently, which like the anti-eating-drinking rule of yesteryear, heralded the end of another celebrated Bangalore party.

The End of the Indian IT Party

On Tuesday, the fourth of May 2017, that celebrated icon of all of Indian softwaredom, Infosys Technologies, went on record to announce their plan to develop four technology centres in the USA and to hire up to 10000 Americans locally while cutting down on Indian H1B visa applications. At the time this announcement was dismissed as any regular old press release by an industry deluded by its own inflated sense of superiority and false sense of invincibility. “Nothing can happen to the Indian IT model”, they said, “the world is too dependent on us”. It has been two years. Looking back now, this announcement is now part of history as the industry’s first major open admission of how it was moving away from the operating model it had been following for more than two decades to something radically different. The date should be marked in history as the day the transformation of the Indian IT industry had reached critical mass, finally opening the floodgates and precipitating the changes the industry was going through. The old Indian IT business model, the source of great pride, wealth and much of the global Indian middle class, finally made way for the Indian IT industry to be remade as a real global technology business.

In the two years since, the industry has been going through immense and irreversible changes. They are setting up primary operational bases abroad and ramping up hiring at client locations. They are reducing headcount in India and the number of H1Bs. They are going full-on digital and high-tech rather than manual and people-centric. They are automating large swathes of their businesses. In short, they They are concentrating on quality rather than quantity and cost-effectiveness rather than cost-saving. And yes, they are no longer hiring generic-skilled graduates by the hundreds but are focusing on highly-skilled professionals. News of layoffs have become commonplace, “experienced” people are shunned, replacement hiring has almost stopped and even the concept of a “bench” sounds ridiculous today. Profitable onsite opportunities, Indian IT’s biggest draw, have dwindled down to almost nothing. The era of the “IT manager” is over, and once you are 40, you are outdated and your IT career is finished. Freshers are still in demand but are being hired at 2008-10 level salaries. The big four of IT, who combined hired many lakhs every year during the glory years, added only 17456 people last fiscal! The days of the IT industry as a mass job generator have come to an end. It has become an unrecognisable, though much more leaner and meaner self of its glamorous past. Much of this change is for the better, no matter what naysayers say, because the Indian IT industry of the past would come across today as a ridiculously inefficient model which in no way would’ve sustained in today’s world.

While all this has been very beneficial for the industry itself, its image has taken a beating in the eyes of the general Indian public. For around two decades, the “IT job” had been a parallel contender to the government job as the career of choice. A B.tech degree was seen as the sure-shot path to a “set life” through a job at an IT firm, which is what has been upended by the evolution in the industry’s human resources approach. This has ended up in a perception that the Indian IT industry is in “decline” and about to fail. But as it has been abundantly and repeatedly made clear, this is a false understand, a result of the hardened perception of associating the laying off of employees with business losses and decline. What we need to understand is that we live in a brave new world where the old rules no longer apply. Everything we believed about how the world worked, is changing to a great unknown. Companies are laying off and not hiring not because they are in loss, but because they are making greater amounts of money than ever before! The headcount reduction actually helps them in this. Replacing people-centric manual stack development with digital and automatic process efficiencies helps them to deliver better business value, customer experience and profits in a more cost-effective manner. In English, this means they are making money by replacing fallible people with efficient code, or in one word, by automation. The entire premise of software development itself has evolved and changed, with its once most core part – its people – being cut out of the equation. In this scenario, the word “disruption” would be more apt to describe the current situation rather than “decline”.

Disruption

Doomsday sayers were predicting the “downfall” of the innovation-starved, outsourcing-based model of the Indian IT industry for a long time now. The crux of their argument was that this system built on cost arbitrage alone was unsustainable and would collapse the day an alternately cheaper option for outsourcing emerged. We did no innovation, no creating new products or found no great technological breakthrough, but were happy being a giant back office of the world. They warned us about how we are going to be put out of business by the Chinese, Philippinos, Eastern Europeans or Latin Americans any day now. However, what happened was something entirely different, something no one even could’ve possibly imagined in 2008. The Indian IT industry got disrupted not because India got expensive or Vietnam cheaper, but because the very idea of leveraging people to develop software itself was made redundant. When you cut the human out of the process, you realise that you don’t have to ship work to India or China or Romania or anywhere else for that matter, and that your products and processes get much more efficient and error-free. In other words, new technologies enabled a handful of specialised people to generate much better results than a hundred of generically-skilled people sitting in a building and typing on keyboards. In one shot they could increase profits through multiple channels by increasing efficiency and reducing headcount. Cost cutting through retrenchment was no longer a bad word, until then associated with removal of coffee machines and paper napkin dispensers from company cafeterias, but a term identifying cutting-edge competitiveness. Why spend millions on resources so fallible, ineducable, slow, troublesome and unpredicable as 30+ year old humans, when machines can get the work done much better at a fraction of the cost? That was the disruption.

So how has this disruption changed Indian IT? It has forced us to move to a business model based on technological solutions focusing on delivering exceptional value to customers, also called the digital evolution or digital transformation. Post the 2008 recession, businesses realised that labour and cost-intensive development processes are not sustainable and instead started focusing on delivering highly-efficient and trouble-free experiences to their customers, demanding the same from their IT consultants in India and elsewhere. Indian IT companies, still stuck with the age-old outsourcing method of hiring thousands of people and renting them out to clients for ultra-cheap fees in return for equally low-quality work, suddenly realised that this was inefficient and outdated. They then jumped to adopt new paradigms and philosophies like cloud computing, automation, lean structures, agile methods, DevOps, digital technologies, machine learning, Artificial Intelligence and so on to meet their clients’ demands for digital efficiency more effectively. At the same time, battered by massive political and economic backlash across the world, globalisation no longer offered the benefits it once did, while digitisation and automation did. So, Indian IT companies invested in these technologies rather than people and H1Bs, leading to a sharp decline in the legendary benefits the industry offered to its people. In the process, the Bangalore party died, and with it celebrated words like Bangalored, outsourcing, and so on, and the city itself.

On a macro scale, this disruption happened because everything is expendable in the way of the cut-throat capitalist’s pursuit of profit. The first thing that is expended is the employee who remains the corporations’ biggest liability. Do not let flowery HR dialogues fool you into believing otherwise. The rest of this chapter deals with how this disruption came to be, on how the Indian IT industry came to discard its old business model and stopped being a mass-hiring people-placing business and transformed into a lean digital industry.

What Really Happened?

Standard answers are always on the ready, aren’t they? Automation, surely? Brexit, possibly? Trump, certainly? Indians are especially taught from childhood to view things only in black and white and never to acknowledge all the grey in between. Events like the disruption in the Indian IT industry do not happen overnight or because of one factor or incident or person alone. Companies that once hired hundreds of thousands do not suddenly stop doing so and shift abroad. These are the result of long-drawn out processes led by a chain of global events and a combination of factors, shaped by agents of change and put into action by a series of triggers. There is ample enough data to help us chart out this journey. Take a look at this graph and chart below. It tells us everything that is to know about the Indian IT industry, its pulse and direction, which anyone who is interested in the industry or wants to build a career in IT should take a look at. The red line follows by how much IT exports have grown over the years, in percentage, while blue bars show the actual amounts of money generated by IT exports from India in billions of US$. It shows us what the Indian IT industry is what actually caused its disruption. And no, it was not Trump.

We can draw a number of conclusions from this chart. First, the Indian IT industry is not growing as it once used to, as evidenced by the red line. Secondly, the Indian IT exports are still making a large amount of money, as we can estimate from the blue bars. Looking closely, we can see that while growth had crashed multiple times, the total amounts of money the industry made had never decreased, not even during the recession. The Indian IT industry still generates insane amounts money in absolute numbers but not incrementally enough to be redistributed. In other words, IT companies are making money, but IT people aren’t. The red line can also be a representative indicator of the growth in income and “real” wealth (not credit-funded cars and apartments) of an average IT employee as much as that of the industry, because the growth of an industry is often directly proportional to the growth of its employees. The blue money bars coming from software exports once used to go towards perks and goodies for employees, ranging from exorbitant salary hikes and expensive parties to even shared home loan payments, resulting in domestic development and growth. Not anymore. In the two years since that fateful announcement of 2017, the red line has reached the lowest point since the great recession (3%) the direct effect of companies relocating onshore. It also brings us to the final conclusion, which is that the entire mess started a long time before Trump.

The Great Recession Disrupted Indian IT

The red line, after soaring up all decade, takes a nosedive to hit the ground in 2007-08 and never recovered. Yes, the Indian IT industry was disrupted by that cataclysmic event that also had the same effect on every single economy and industry in the world. Indian IT exploded on the scene around the year 2000 with close to 80% growth thanks to the big Y2K scare, only to collapse spectacularly the very next year thanks to the dotcom bust. But it quickly recovered and went on to script the great five-year Indian IT success saga. By 2007, Indian IT exports were steadily growing at 40% year on year. The future never looked more promising, an endless sea of riches and opportunity. But there was danger lurking beneath that surface. The surging IT industry lulled everyone into a sense of euphoric complacency that the growth and the good times would last forever. However, nothing lasts forever. The infinite cycle of growth a lot of go-getters around us dream of all the time is sadly all but impossible according to the laws of nature of our finite universe. When the bubble finally burst, it was an explosion that took down with it the entire world economy, that yes, included India. “But everyone says Indian economy weathered the Great Recession!” you might want to say, but that is only partially true. It didn’t, not in the long run.

The general world population does not fully realise or appreciate how profoundly the events of 2007-08 have impacted and changed the human civilisation. The Great Recession was not just a period of slowdown in the global economic system but an enormous reset on the entire social, cultural and political system in existence since World War 2. It created the incredibly unequal, rich-get-richer, autocratic world of today where you will not do better than your parents and will probably never pay off your college loan. It also created the cost-saving digital industry model. The cash crunch caused by the recession made western businesses, including clients of Indian IT companies, realise that the method of throwing money at armies of people to get work done was not sustainable in any way. They started looking to get things done with much better cost-effectiveness and leaner methods. It was then found that using machines to test machines was much more efficient and cheaper than using humans, and the output was much faster and of better quality. Win-only situation! This is how the industry eventually shifted from a resourcing-based model to a digital model.

Rivers of digital ink has flown celebrating the “resilient Indian IT industry” and its “weathering of the Great Recession”. We were led to believe that while the world was down in the dumps, the Indian IT industry was roaring ahead unscathed by the gloom and doom. Well, apparently it didn’t, if that chart is any indicator. It is just that it took a long time for its effects to be fully felt. Any talk of “weathering the crisis” is either propaganda or bullshit, or both. The Great Recession of course affected the Indian IT industry like it did every other industry in the world. It was all part of the deal. When we signed all those agreements in the 1990s to plug our until-then protected and isolated economy into the globalised financial ecosystem, we were agreeing to subject it (us) to not only to the gains but to the shocks as well. It is said that the greatest innovations and leaps forward in human history, be it in technology or philosophy always happen during the time of war. In that way, the Great Recession was a kind of period of “financial war”, which just like real war, spawned and sped up innovation, causing the underlying faults and instabilities of our system to expand to disruptive levels. All that was now needed for the actual disruption to take place were some agents of change, powerful forces that can widen these cracks into new break away systems altogether. In our case, these executioners of disruption were Automation and Moore’s Law.

The Agents of Change

We all know about the first one. The second one, though caused the paradigm shift in how software was seen and used, is rarely talked about. One would ask: “If Moore’s Law predicts the doubling of computing power while its cost halves every 18 months, wouldn’t that benefit the IT industry?” It would have, if only our industry could move with the times. If you look closely, you will find that the timelines of changes in the Indian IT industry roughly coincide with the rise of the smartphone. By the mid-2000s, Moore’s Law was making the internet accessible to more and more people across the world. In September 2008, HTC released the “Dream”, the first ever commercially available smartphone to ship with Android installed. Until then, high-end communication devices were proprietary installations fostering closed, monopolistic, elitist ecosystems (Apple, Blackberry, Nokia (E/N-series)). Even at the beginning of 2010, smartphones, though much talked about, were still rare. However, Android, helped along by Moore’s Law, was enabling OEMs (from Motorola, Samsung, or Sony to new and obscure Indian and Chinese companies like Lava, Micromax, Xiaomi, Oppo/One Plus etc.) to flood the market with mostly good quality smartphones at affordable prices. Just three years later, everyone had a smartphone. The present-day smartphone-centered digital consumer ecosystem had started taking shape. With every passing year, faster access speeds (3G/4G, Broadband WiFi), smarter computing (cloud), efficient development (Agile, CI/CD), increasing processing power, smarter applications and reducing data and memory costs (Moore’s Law, again), enabled this ecosystem to spearhead new technologies, paradigms and platforms like social media, e-commerce, big data analytics and now machine learning, artificial intelligence and so on. We all know this. What we usually forget is the real revolution the smartphone brought about.

Smartphones literally put computing power directly into the hands of every person. They broke the monopoly large technology companies held over computing power and application development, with profound implications reaching far beyond the tech world. They brought the power of the internet to the masses, changing how people, governments and businesses thought, perceived, reacted and interacted, altering the very fundamentals of the culture, economics, and trajectory of the human civilization.

The smartphone democratised the internet. As more apps, freely interacting platforms and distributed computing and storage technologies became widespread, the pace of business and consumption accelerated dramatically. New paradigms like Agile, Continuous Delivery and DevOps shortened and speeded up release cycles, enabling faster delivery of better performing high-quality software. The cloud turned the entire server-space model on its head, then eliminated it. Free, open source technologies from specialised Linux versions to applications like Wordpress and plug-and-play platforms and browser-based apps, to a myriad of programming languages and the Android ecosystem re-engineered the internet. Open-source IDEs and code repositories, platforms like Github, Eclipse, and StackOverflow meant anyone could code, build, tweak, develop and share applications to their needs. Like we saw before, four guys with internet access could now, in a matter of weeks, build on-demand enterprise apps that didn’t even require a server to run. Meanwhile, without anyone noticing, automation was slowly creeping in, devouring this ecosystem part by part.

Automation

A lot of people seem to think “automation” to be some kind of a recent phenomenon, a villain to rob them of their IT jobs. Not really. What everybody seems to forget is that software and automation aren’t different things but complementing and completing forces, a dual entity, a yin-yang, a Janus, a technological Advaita, one being both the reason and the result of the other. Software is automation itself! Think about it. All code is written to automate some existing practise. The very purpose and ultimate goal of (information) technology is to eventually automate everything, including itself. The broad job description of every single person working in IT is to automate something or the other, including their own jobs. And it is not just IT. All industrial activity in the history of humankind, from the earliest flint tool to the wheel to steam engines and electricity grids were all automations. The arrival of computers only massively speeded up this industrial automation process. When IT came first to India, it was simply called “computerisation”, or getting things done what was until then paper-based manual processes, or the automation of documentation, banking, services, ticketing, retailing. What changed in 2008 was that automation in IT moved to the next level, from automating other things to automating its own processes. Automation is only natural to IT like evolution is to the biological world and stopping it would mean destroying the industry itself as it would lose all meaning of existence. It would be like ordering the automobile industry to stop putting engines in cars because they pollute (though that would not be such a bad idea). Most “coding” and “developer” manual jobs will eventually be fully automated. Automation teams are today core parts of most information technology companies, usually called the RPA (Robotic Process Automation) department, which is only a fancy name for “try to get rid of as many people as possible” department. It is only real that the actual target of most of these department is to reduce headcount.

So, as increasingly automated paradigms and “democratised” apps took over most of their repetitive work, all those huge legacy software companies with their hundreds of coders endlessly hammering away at keyboards suddenly found themselves to be hopelessly outclassed dinosaurs. The long drawn-out, lazy business model that Indian IT companies followed, where application development took three years and release cycles happened once in six months, could no longer work. Amazon does a release every 11 seconds. In the age of DevOps, no one would wait for six months for a bug to be fixed. Technology has not just changed the way business of all kinds is being done but its very reasons and attitudes. All this while, Indian IT companies were still hung up on billing and resource management. Suddenly, everything wasn’t about budgets and deadlines, but more and more about efficiency, value and customer experience. Indian software companies couldn’t seem to comprehend how “we will bill you at just $15 per hour” was not the answer to these questions. As software and licenses became increasingly open, free, distributed and “known”, “cost” and billing all became meaningless, eroding the only advantage Indian IT had to offer. Nobody any longer required all those armies of people to sit and write mundane code. As the number of “workers” came down, the bloated “middle manager” level of deadwood with fancy business-card titles who did little other than pushing these worker ants around also became redundant.

In many ways, it can be said that the changes we are seeing today in how Indian IT companies function were set in motion by Vishal Sikka when he was CEO at Infosys. Despite its flashy campus and unconventional (or horrendous, depending on how you look at them) buildings, the so-called “bellwether” of the Indian IT industry’s values were very 1980s-socialist-India, ultra-conservative and risk averse, in stark contrast to the industry it operated in. It was Sikka that broke that mould. Under him, Infosys was among the first to sense and recognise the shifts happening in the global technology scene and act accordingly. He shifted the company’s priorities from operating margins (resourcing) to making an impact among its customers and increasing market share. He led Infosys to adopt digital technologies, introduce innovative solutions and models, make aggressive acquisitions and challenge entrenched practices, starting with his shifting of the CEO’s office to California. Of course, none of these went well with the old-school founding management, and we all know how that ended. But by then it was all only too late. Sikka’s thought leadership had set in motion an irreversible sequence of events that spread through the industry like a network blast, and so we are here today.

The trigger that fired the disruption bullet was, of course, President Trump. The current White House incumbent makes it clear that he was not fooling around when he was talking about “protecting” American jobs. American politics of today, just like that of most countries across the world, is inward-looking, anti-immigration and anti-globalisation. The US administration has come with a slew of policies and actions targeting skilled knowledge workers on H1B visas and their dependents (H4 visas). This is in addition to a “shadow ban” by which they simply make it difficult for anyone to acquire visas. The old Indian IT industry model was almost entirely built around the H1B visa scheme. Every project, every billing hinged on how many people could be sent “on-site”, or, on how many long-term H1B visas could be issued to Indian knowledge workers. By the time Trump came onboard, this model was already on its last hurrah, much of which is evident by the absolute silence from the Indian IT establishment on the US administration’s restrictions on H1Bs, despite they having benefitted so much from the program over the decades. They were silent because they had realised that the old Hire > Bench > Assign > H1B > Profits model was long since over, that there were a lot more riches to be made by cutting people out of the equation and handing over the work to code entirely. The dream to “settle” in America seems to be dying a bit more every day and with it, the current Indian IT business model. The bogeyman Indian IT has been fearing for decades has finally materialised in reality. It is funnily ironic that an industry that arose out of India’s protectionist policies had to fall because of another country’s protectionist policies.

In the end, the Indian IT party ended because we forgot the basics. The Indian IT industry was a child born out of a unique set of needs of a unique time, a massive cost-saving vehicle for foreign corporations put in action by Indian companies. It was the greatest automation project ever undertaken in the history of mankind, which, given its nature, would eventually eat up itself. It definitely was not a god-sent plan it in action by a bunch of altruistic philanthropists to glorify the nation and help its people prosper. A lot of Indians who were always unabashedly proud of these organisations’ Indian credentials watched in horror as these supposedly “Indian” companies clicked their heels together, saluted the star-spangled banner and promptly moved their business to the land of the free and home of the brave. It will be better if we realised not to mix up corporate capitalism and nationalism. Corporations have no national or individual loyalties, their goals are only survival and profit. When the industry faces a crisis, they will obviously not shut down, but will embrace disruption to survive and thrive, its people and local economies ending up as collateral damage. The disruption will only pick up pace to reach dizzying levels as automation is rapidly morphing into artificial intelligence and some other fantastic dingolfy we can’t outen imagine could exist. The smart ones will fish in those waters and secure prize catches while the not-so-smart ones will sit ashore and crib about not getting any fish. The world has changed. We better get used to it.

P.S.: For those who ask, the only way to stay relevant in the IT industry is to have a real “passion” in what you are doing, to have a hunger in learning and acquiring new knowledge and skills and on how to apply those skills. Keep learning every day, lest should you be left behind. If you are looking at IT to be a career where you can sit around and relax while watching the money flow in, sorry. You won’t last even a couple of years. Invest in learning what lies ahead of the curve. Right now (May 2019), those are Cyber Security, Machine Learning, AI/Neural Networks, Python, R and their applications and so on. In the not so far future, as most basic technology tasks get automated, the information technology industry will evolve to join the rest of the high-tech industry as a realm of very highly-skilled professionals whose credentials and rewards will equal Tony Stark.

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Jazmyn Solis

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