Are the Chinese to blame for Layoffs in Indian IT?

People are wondering about the state of Indian IT. A number of media articles are claiming "Up to 600,000 IT engineers are likely to be laid off in the next 3 years. (link)" Why is this happening?

First things first, this is not the time to panic over headlines, especially when there are a lot of rumors that are circulating. Journalists – even those with little understanding of the business of IT - are having a field day churning out articles with sensational headlines.

Many articles are focused on Trump administration’s policies and restrictions on visa and immigration. Some are parroting claims by leaders of software services companies that productivity gains and automation of tools and processes needs a lesser number of people. Some analysts are also claiming the need to reskill on emerging technologies including big-data, AI, bots-and-robots etc
Some of this may be true, but doesn’t explain the churn of tens of thousands of jobs.

There are a couple of black-swan like factors at play here which hasn’t got as much attention.

Growth of IT services in China

  • Large services firms including Infosys, Wipro, TCS and even global players like Accenture and IBM have been growing their software delivery centers in China.
  • After the initial announcements of center-inauguration, these companies have gone about quietly increasing the headcounts
  • Chinese deliver centers are staffed with English-speaking Chinese who are also comfortable servicing east-Asian (Korean, Japanese, other) clients
  • Large service firms have applied the same large-scale hiring and boot-camp-training technique to scale their operations in China to hire tens of thousands of English-speaking graduates.

Growth of Captive IT

  • Just do a quick search of job-boards on LinkedIn and elsewhere. What do you see? Almost 50-60% of the jobs posted are from companies like Thomson Reuters, GE, Akamai, Shell, JP Morgan Chase etc. One might similarly see jobs from software companies like Amazon, Google, DELL, Salesforce, SAP, Intel. A smaller percentage of the job-posts are from Infosys, Wipro, TCS, IBM, Accenture etc.
  • The fact is that many of these end-clients are bypassing the offshore vendors - and a few are supplementing vendors’ services - by establishing their own “shared service” centers in India.
  • Check out my detailed arguments on the topic on Linkedin Pulse
  • While layoffs by IT firms are making headlines. There are very few mass-layoffs at captive-IT centers
As per recent media accounts (link), even Indian IT leaders and NASSCOM haven’t been able to explain the reason for the buzz over IT-layoffs in India. Could it be due to the Chinese factor and the growth of captive IT centers? 

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