IT jobs safe despite S&P’s US downgrade
Posted on August 22, 2011
It’s exactly a week since the S&P downgraded the US credit rating and the week has seen a wild swing of ups and downs. Over this past week, in our Q&A section we asked readers to post their questions so we could get answers for them. One of the most common questions: Is my IT job safe?
If you are an IT worker in India or deputed to the US through an Indian company…
The experts say: Yes, your job is safe. No crisis is likely in the next 0-6 months. Says Nitin Sethi, Practice Leader – Consulting, Aon Hewitt, “By any possible yardstick, this is not a crisis as yet. In the next 0-6 months, we do see companies becoming a little prudent. They may not hire very aggressively, but certainly, we don’t see job losses.”
And that sentiment has been reflected by the heads of several IT companies, who have, in the last week given out several assurances. “Although the global economic environment is a cause for concern, it is not likely to impact the Indian IT industry in the near-term future,” Nasscom President Som Mittal had said.
Kris Lakshmikanthan, Founder CEO and Managing Director of Bangalore based firm, The Head Hunters too believes that while 2012 IT budgets of US companies will be affected, things will not be as bad as they were in 2008. “Ongoing projects will not be affected but any new projects and investments will most likely be shelved. Clients usually finalise their budgets for 2012 in the last quarter of 2011, that is, the Oct-Dec quarter. Apart from budget cuts for 2012, all escalations and upgradations will be put on hold. But things will not be as bad as the 2008 crisis,” he says.
What this means is that IT workers will continue to hold their jobs. Workers in the US who are on short to medium term deputations will stay on till completion of their projects.
Experts cite 3 main reasons for this.
1. Indian IT companies are geographically well diversified
Indian IT has learnt well from the lessons of the 2008 crisis. Back then, Indian companies were heavily dependent on the US, but now they have diversified geographically. Indian IT companies now have exposure, not just to the US and Europe but even to countries in the Asia-Pacific region and Australia.
2. There is strong domestic demand
India is currently witnessing a strong growth phase. Although the stock markets plunged, the other fundamentals of the economy continue to remain robust. Indian IT companies have a large domestic demand to meet. “Although domestic market is a low margin business, the demand is nevertheless significant,” says Sethi.
3. Companies have been prudent since the crisis of 2008
Since the crisis of 2008, Indian IT companies have focused on a key aspect: that of improving productivity and efficiency. Lakshmikanthan explains, “A lot of tightening in operations and systems had already been done by Indian IT companies after the crisis of 2008. They had continued to be cautious ever since. So this time around, they will be better prepared.”
Echoing a similar sentiment, Wipro CEO (IT Business) and Director TK Kurien said in an interview recently, “We feel that the industry is far more prepared for any change in the negative macroeconomic environment now than we were in 2008.”
Jobs for fresh graduates?
If you are a fresh graduate with an offer letter in hand, experts believe you will indeed be called to join. Entry level hiring is one of the ways in which IT companies manage costs, so experts don’t think there is going to be an issue there. Companies like MindTree have already said that they would go bullish on campus hires to reduce people costs.
“Moreover,” Sethi adds, “today in India various other sectors like power, oil & gas, infrastructure are offering promising job opportunities. So fresh graduates can find jobs in these sectors too.”
If you are an IT worker living in the US and working in the technology space…
The outlook remains stable.
We spoke to Al Delattre, Global Market Managing Director – Technology at Korn Ferry International who gave us a complete lowdown. “While the ‘new’ technology economy (like cloud computing, digital companies) is quite different than it was just a decade ago, and while some jobs have moved out, the underlying US tech economy and employment picture remains stable. Increasing and stable consumer and business appetite for new technology products, consumption of bandwidth and demand for new services has remained strong even during the recent downturn, in some cases in spite of traditional indicators that would have predicted more softening. ”
1. Change in technology landscape
The technology landscape in the US has changed over the years. Newer segments of the technology ecosystem like cloud computing and digital companies have seen growth and spiked employment. As Delattre points out, “While the ‘new’ technology economy is quite different than it was just a decade ago, and while some jobs have moved out, the underlying US tech economy and employment picture remains stable. Potential constraints or impacts to this of course remain the health of overall global economy, but also the availability of the right skilled individuals – the so-called ‘SMET’ population (Science, Math, Engineering, Technology) that form the cadre of the tech workforce.”
2. ‘Productivity dividend’
Another dimension that has affected the technology industry, along with every other industry, is the ‘productivity dividend’ that has emerged in business over the past decade.
Delattre explains, “Productivity gains achieved by the use of technology and automation, coupled with the pressures of this economic downturn and the relentless cost and competitive pressures, have enabled businesses to accomplish much more, with much less labor. This has resulted in leading companies being able to drive growth and expand margins while making only modest increases in their organizational sizes. In the face of uncertain market conditions, competition and shareholder expectations, many companies have chosen to retain this dividend and operate in this new normal going forward. As a result, the requirement for net-new employees in existing businesses has decreased somewhat; offsetting this is the opportunity seen by small businesses to engage in this economy and entrepreneurial organizations that are struggling to find talent needed to fuel their growth, which creates the potential for more jobs, albeit skilled ones that may not exist in the SMET-constrained candidate pool.”
3. Geographical spread
Just like in the case of Indian IT companies that have diversified across various geographies, US technology companies serve markets around the world, so even in cases where one geography might be seeing softening in demand and conditions, other regions may see strong growth that compensates a slowdown to some degree.
Having said that, Delattre does caution that technology companies that are tied to specific geographies like the large national telecommunications and cable providers as well as companies that rely on government spending as a primary source of business will face challenges in the face of budget cuts.
Heading back to India?
If you’ve been planning to head back to India, the latest crisis should not change your plans. Over the past few years there has been a significant movement of talent to India. “That is likely to continue,” says Lakshmikanthan.
Sethi too explains, “Over the next decade, India is going to need a lot of talented manpower; people with skills and global expertise. So people coming back will always have opportunities in India.”
Aug 19, 2011
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