What the Indian IT industry should watch out for in 2016

This year will bring both opportunities and challenges. Here’s what the industry should guard against in 2016.

Sunil Shah Jan 28th 2016

The Indian IT industry has had a tumultuous year as it’s come to grips with the digital wave and new customer demands.

But digital is not the only thing on the minds of the industry’s leaders. 2016 will bring with it a slew of its own challenges. Here are some.

The Rise of Automation: There’s been a lot of media coverage in 2015 about the rising amount of automation with IT service firms—much to the consternation of IT employees afraid their jobs will be replaced by algorithms. But no matter how you look at it, automation will only increase in 2016 and beyond.

Industry body NASSCOM predicted that the industry would create 30,000, or 13 percent, fewer jobs in fiscal 2015-2016 compared with the previous year. It’s part of a long-term push by the industry to separate revenue growth and increases in manpower. 

"The industry is taking steps to decouple revenue from headcount growth with more automation and platform-based revenue growth. We will continue to be a net hirer, but the pace of hiring would change," said R Chandrasekaran, executive vice chairman of Cognizant India, according to the Economic Times.

Reforms to the way H-1B and L-1 visas are granted could become a sticking point in 2016.

According to other media reports Infosys and Wipro expect automation to have visible impact on their results by 2017.

But that need not worry IT staffers who are willing to learn new skills. Shashi Kumar, CEO and MD, Happiest Minds, advises IT workers to be more “T-shaped”. By this he means that they should have complement their deep domain knowledge, with a more horizontal view of technology. “You need to understand where the shifts are taking place,” he says. “You have to be a participant in your own rescue.”

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Digital India: Although the bulk of the revenues of the Indian IT companies comes from exports, the next year could see it pay more attention to India. According to Gartner India will be the world’s fastest-growing information technology IT market in 2016. Much of this growth will come thanks to how more Indian companies are getting on the digitization bandwagon and the increasing number of connected devices that form the Internet of Things. There’s also the significant digital push the Indian government is making to digitize the country.

Visa Worries: Reforms to the way H-1B and L-1 visas are granted could become a sticking point in 2016. These reforms seek to ensure that qualified American workers get first employment priority and do not lose jobs to foreign workers. This could limit the number of Indian technology professionals IT companies can ship to the US, and increase the cost of doing business.

There are two bills. One categorically prohibits replacing American workers by H-1B or L-1 visa holders. And the other wants to increase the minimum wage of H-1B. The latter is being pushed by presidential hopeful Se. Ted Cruz.

The first would “prohibit companies from hiring H-1B employees if they employ more than 50 people and more than 50 percent of their employees are H-1B and L-1 visa holders,” according to the official page of Senator Chuck Grassley, Chairman of the Senate Judiciary Committee, who along with Dick Durbin, Assistant Democratic Leader, are pushing the bill.

Automation need not worry IT staffers who are willing to learn new skills. “You have to be a participant in your own rescue," says Shashi Kumar, CEO and MD, Happiest Minds.

By doing this, it is trying to curb alleged practices of placing lower cost foreign nationals in American companies, for a short time, to learn the job of an American. Once foreign nationals return to their home country, they replace American workers.

“Local (American) employment must be protected. That’s the right thing to do. I don’t think IT companies are being penalized,” says Satyajit Bandyopadhyay, chief delivery officer and president, Ness India.

According to the Wall Street Journal, failure to comply to the law will attract fines of between $5,000 and $25,000. The company might also have to compensate American workers affected by the violation. Finally, that company will be barred from employing people with H-1B and L-1 visas for a year.

The second, more recent bill, called the The American Jobs First Act of 2015, wants to raise the minimum wage of H-1B workers to $110,000 a year.

The possible reform isn’t yet taking over boardroom conversations within the IT sector, but with the US presidential elections due in November 2016, you can expect it will as coverage around the bill increases, as presidential hopefuls ensure their electorates that they will protect American jobs.