Infosys has joined TCS and other Indian information technology services firms in announcing plans to hire more local workers for their cross-border work. Much of this hiring will take place in the United States to try and influence the Trump administration’s review of the H1-B visa programme.
The expectation is that the review will, at the very least, pave the way for higher visa fees if not slash the number of such visas altogether. Even while it is fighting a rearguard action to save the H1-B, New Delhi should be realistic. The primary lobbying force for such visas is the US software industry. If they are unwilling to put their shoulders behind it, the visa boulder will be beyond India’s ability to move.
What should be understood is that the IT services industry is undergoing a fundamental change, one that is making H-1B visas increasingly redundant. Job growth in India’s IT services sector had been falling even before Trump was voted to office. Two technological developments are responsible. One is robotic process automation which is slowly erasing job creation in business process outsourcing, a pillar of the Indian IT industry.
A few lines of software can now replace thousands of programmers while voice tech is wreaking similar havoc on call centres. The other is what the industry calls SMAC innovation – social, mobile, analytics and cloud – in which software services are increasingly provided ready-made and transported through the internet. Unfortunately, Bangalore has been addicted to an earlier low-wage, body-shopping business model that is running out of steam.
The result is already evident in the industry’s job figures. Nasscom, the Indian IT industry body, says overall job growth for the sector was only five per cent in 2017.
Worse, it predicts IT jobs will shrink by 20-25% over the coming three years. Donald Trump’s impact may further pinch profits but he will be doing little more than flogging a horse that is already dying. India’s software industry must look at moving into exactly the cloud-based space that Silicon Valley firms are already well placed. The competitive advantage for a firm in this area is innovation, not labour arbitrage.
E-India Inc needs to reinvent itself and quickly. An obvious opportunity for Indian firms lies in Digital India. While Digital India remains nascent, the experience that its roll-out will provide would make India’s IT firms trailblazers in a new tech frontier. Bangalore has been the nation’s pride for two decades. Now it needs to upgrade.