IT firms upskill staff in new technology age

With change in technology globally, the Indian IT services sector is undergoing a significant transformation.

The information technology industry has already started embracing technologies such as automation, cloud, digital and analytic among others.

There is always debate and discussion in the Indian IT spectrum on the availability of employees with right skills who are readily employable. The gap between the demand for skilled workforce and availability is widening though this trend has been clearly evident from the nascent days of India’s IT. In the initial days of information technology, the reason for this demand-supply gap was the lack of knowledge and disconnect between the industry and academia. However, in the new era, one of the most important reasons for the huge demand-supply gap has been the rapid change in technology. Backed by rapidly changing technological landscape, the need for niche and specialised technology skills such as social, cloud, analytics, automation and mobility is also acting as a catalyst.The IT industry, which is pegged at around $146 billion, is undergoing a sharp shift in the way business is done, mainly due to many clients demanding different kinds of skill sets as compared to the past.

“Digital is reshaping the technology sector and the industry focus is to understand the full potential of digital technologies and help customers make the best of it,” said C. P. Gurnani, Vice-Chairman, Nasscom.

However, one important question asked by the experts at this point is, “Do we have enough skills to really become scalable?” Looking at the success of the IT industry, one can say that ‘with the talent India has, we can achieve it easily’.

Skill and talent

According to various statistics, every year about 1.5 million engineering graduates are produced in India and IT sector absorbs a good number of them. During the past years, Indian IT has seen employing mechanical, civil and electrical engineering and even science graduates as software engineers for handling various projects.

“There is a big difference between talent and skill. India has good talent and if you have people with right aptitude, they can be taught different skills,” said Sarita Digumarti, co-founder of Jigsaw Academy,which specialises training in analytics.

Indian IT sector, which employs over four million people, has already started taking initiatives to tune its workforce to the changing business necessity. These re-skilling measures embarked upon by the companies would ensure that each employee can do multi-tasking unlike in the past where one was trained in a specific language or technology.

As per analysts and trainers who track the sector, during the early days, Indian IT companies were looked upon as partners who can help clients execute various processes. But with various macro-economic factors impacting business,Indian IT services firms are considered as partners who can help clients transform their business in tough times.

Upskilling people

Major IT services companies such as Tata Consultancy Services, Infosys and Wipro among others have initiated various programmes to upskill their workforce.

Wipro and Infosys have already echoed that going forward many of the projects they expect to win will be backed by their capability in offering new technologies such as artificial intelligence, digital and automation.

Following the giants, small and mid-Tier IT service providers are also betting big on these segments. In today’s world of business, it has become a necessity for each player to be a full stack service provider.

Readying its employees by itself, Bengaluru-based IT major Wipro, which employs more than 1.71 lakh people, has launched an initiative called ‘Newton’s Cradle’ to re-skill its employees. The programme aims to train existing workforce in digital technology and also aims at sharpening the skills of its employees.

Under the programme, employees, with more than five years experience, are released from their projects, retained and re-deployed in much-valued projects.

India’s second largest IT exporter Infosys, which employs over 1.93 lakh people, has also been very active in training employees in new technology trends. Since, the appointment of Vishal Sikka as the CEO, it has started internal upskilling process. The company has earlier said that it aims to have 25,000 employees trained in design thinking and automation.

One of the reasons for internal reorganisation is primarily lack of skilled talent available for lateral hiring.

“Since most technologies are nascent, it is difficult to hire in large numbers. Hence, we supplement our internal expert pool by hiring laterally from the industry in small numbers. In parallel, we upskill our employees with related skills to build scale for our emerging technologies portfolio,” said Vishwas Santurkar, Vice President and Global Head, Talent Transformation, Wipro Ltd. Apart from the in-house grooming and training plans, many corporates have partnered with various skill-based specialised training providers such as Edureka, Jigsaw Academy, Simplilearn, among others.

The burgeoning need for specified skills has created a new market opportunity for the new-age entrepreneurs also.

According to Lovleen Bhatia, co-founder and CEO of online training company, Edureka, “The overall online training market in India is about $20 billion and with now niche training picking up, niche training market also runs to a couple of billion dollars.”

Corporate move

With the race to find more skilled people in digital and other emerging technologies, Indian firms are now becoming aggressive on the merger and acquisition front too. The giants have kicked-off a new culture of start-up funding and even established corporate funding arm to invest in start-ups with people having skills in cloud, digital and automation areas.

Wipro created a $100 million fund driven by Rishad Premji, son of Billionaire Chairman Azim Premji. Similarily, Infosys has set up Innovation Fund with a corpus of $500 million. Through these funds, they invest in companies and also take solutions to clients.

“More and more of the start-ups that we work with, including the start-ups that we invest in are making their way into solutions that we build for clients. That is a good thing because we can bring the latest technology from start-ups to these clients,” Mr. Sikka had said during a recent earnings call.

Aggressive acquisition is another strategy adopted by Indian firms to find new technology and skills.

Some of the deals include Infosys buying Skava and Panaya; Wipro’s buyout of Designit and Mindtree acquiring Magnet 360.

Going forward

With all these factors of new age technologies and automation, Indian IT services that followed time and material contracts may look at outcome-based contracting. This will result in a big shift towards a non-linear approach that essentially means the task may not depend on number of people.

Earlier in 2015, media reports quoted the then CEO of Wipro as saying that the investments in automation, artificial intelligence (AI) and digital technology will improve efficiency and result in reduction by 30 per cent in its headcount in the next three years.

Looking at several macro economic and other factors, hiring is expected to slower going forward. However, the need for niche skills may be at the top of the mind of many HR managers.

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Fiscal deficit at 88% of annual target

The government’s fiscal deficit for the first nine months (April-December) of this financial year stood at 88 per cent of the annual target comparable with 100.2 per cent of the target it managed during the same period in the previous financial year.

The April-December fiscal deficit — the difference between government revenue and expenditure — stood at Rs.4.88 lakh crore, which is 88 per cent of the Rs.5.55 lakh crore target for the full year set by Finance Minister Arun Jaitley in the Budget. It amounts to 3.9 per cent of the GDP, a target that many industry leaders want to be pushed back in favour of increased public expenditure. They said it will boost domestic demand.

Several economists argue that it is important to stick to the fiscal deficit target since government accounts already fail to show the correct picture.

“The government has Rs.70,000 crore of unpaid bills to the Food Corporation of India due to the food subsidy, and a similar amount of unpaid bills due to the fertiliser subsidy that haven’t been shown in the Budget. This omission makes the fiscal deficit number look better than it is. It is important that the government sticks to the fiscal deficit target because the real number is likely higher than what is being shown,” Ashok Gulati, Infosys Chair Professor at the Indian Council for Research on International Economic Relations told The Hindu.

The other argument is that the government must simultaneously increase public spending and still keep a tight grip on the fiscal deficit target since it is availing the benefit from falling oil and mineral prices.

“The government must stick to the fiscal deficit target. Government expenditure has to also be increased, but the government has to come up with innovative ways to finance this.

“One way is to revive PPPs, and the Kelkar Committee report laid out a good roadmap for this. Another way is to bring to resolution the large number of tax dispute cases held up in court, which will then release the tax arrears,” said M. Govinda Rao, Professor Emeritus at the National Institute of Public Finance and Policy.

The third option is to make use of the huge saving the government is incurring due to falling oil prices. Mr. Jaitley on Friday told the Press Trust of India that the savings from oil prices will be pumped into infrastructure.

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Creating the next Apple with a ‘secret sauce’

he Infosys Mysore campus is home to several thousand trainees and employees of one of India’s largest home-grown multi-billion-dollar IT services firms. If you take a stroll around the campus, which is equal to over 200 football fields, one can find amenities like multiplex, gym, swimming pool and a huge cricket ground.

Founded more than three decades ago by seven engineers with just $250 (Rs.16,945), Infosys has put India on the map of the digital world. It has grown to become a $9.21 billion (Rs.62,406 crore) company with over 1,93,000 employees worldwide.

Third largest start-up ecosystem
Till now, no other tech start-up idea especially product company has become as big as Infosys in the country. India is now the world’s third largest start-up ecosystem. There are now over 18,000 start-ups in the country and about 5,000 new age firms got created last year according to TV Mohandas Pai, India's top angel investor and former Infosys director.

Nagging worry
However, there is a nagging worry that there are only handful of companies that can be called as leaders in their category. And India’s start-up ecosystem has started to realise this.

This month something very unusual happened at the Infosys Mysore campus. Over 200 product start-up founders operating ventures ranging from healthcare to education huddled together in one big room. They took part in an experiment run by software product think tank iSPIRT and was backed by research grants from Stanford Graduate School of Business and Duke University. Infosys provided the campus facilities.

‘Secret sauce’
The aim of the researchers was to help the start-up founders to find the ‘secret sauce’ of how to take on the big companies operating in their space and become a category leader.

“Do you remember the fourth largest search engine or smartphone maker, the answer is no, because the ‘winner takes it all’,” said Sharad Sharma, co-founder of iSPIRT. “You don’t become Sachin Tendulkar or Usain Bolt by accident. There is a science management behind it.”

For instance, U.S. is home to success stories such as Apple, Google, Facebook, and countless others. Just these three companies combined have a market cap of $1.5 trillion and employ more than 1,65,000 people worldwide, according to research firm Compass.

Even a small country like South Korea has produced category leaders like Samsung, one of the world’s largest smartphone maker and Hyundai Motor, one of the world’s largest car maker.

“We have big companies here, but they fall in copycat category. Ola is competing with Uber and Flipkart is competing with Amazon,” said Amit Somani, Managing Partner at venture capital firm Prime Venture Partners. “To give an analogy, it is like why Indian’s have so few Olympians and gold medallists?”

Science behind the category leader
At the Mysore Campus, researchers from Stanford and Duke University in collaboration with iSPIRT made the 200 start-up founders go through a three day programme to help them become category leaders.

It included peer-to-peer learning, sharing of academic framework and case studies of experienced founders of top technology firms such as Zoho, Freshdesk and InMobi.

“Indian start-up ecosystem is at an inflection point,” said Sharique Hasan, Associate Professor of Organisational Behaviour at Stanford University.

“The challenge is that it is much harder to create businesses that operate at a global scale.” A sense of community also developed among the tech entrepreneurs. They shared knowledge, trade secrets and learning to help each other.

‘Unfair advantage’
“You were made to do self-introspection and come up with an ‘unfair advantage’ that would help you to succeed against large companies,” said Mandeep Makkar, co-founder at financial media firm Amigobulls and one of the participants.

Her start-up offers stock analysis in the form of easy to follow videos instead of lengthy text information.

New businesses must stand out to make a dent in the industry. The young firms went through a ‘Shark Tank’ module where a founder challenged the fellow entrepreneur, if the person can become a category leader.

“As Indians, we are nice to each other,” said Pallav Nadhani, founder of FusionCharts, a maker of software for data visualisation used by customers like U.S. space agency NASA and technology companies such as Apple, General Electric and defence firm Lockheed Martin.

“In this programme we gave brutally honest opinions to each other,” said Mr. Nadhani.

One of the participants, Ahimanikya Satapathy, founder at healthcare tech firm DocEngage said that he realised that it is very important to have a belief that can adapt to the changing environment. “For instance the belief of sportswear giant Nike is to make the life of an athlete better rather than just making jackets,” said Mr. Satapathy.

The researchers at Stanford and Duke have developed a software which would track the performance of these 200 founders and their companies in future. Both the universities have also provided a grant of $57,000 (Rs.38 lakh) to run the programme.

One of the top mentors at the event was Phanindra Sama, co-founder of redBus which transformed long distance bus travel.

RedBus centralised ticket sales on its system and brought a fragmented market of thousands of private coach firms online. He said till now, the country has been building products which have only filled the gaps left by large technology companies like Oracle and SAP.

“We are mentoring these firms not to get the leftovers but eat the whole pie,” said Mr. Sama who sold redBus to Ibibo Group, a subsidiary of South Africa-based media company Naspers, for $135 million (Rs.914 crore). “If we have to displace large firms, we need to think big,” he said.

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Infosys beats market estimates; net up 6.6%

Infosys, India’s second largest software exporter, posted a net income of Rs.34.6 billion rupees for the third quarter ended December, beating analysts’ estimates, and raised its annual sales growth guidance to between 8.9 percent and 9.3 per cent.

The Bengaluru-based company had earlier forecast full-year sales growth in dollar terms would range between 6.4 percent and 8.4 per cent. A Bloomberg survey of 25 analysts estimated net income of 33.5 billion rupees. Infosys shares rose 4.3 per cent to Rs.1,128.70 on the BSE.

Total revenue for the October-December period was Rs. 15,902 crore registering a growth of 15.3 per cent when compared with the year earlier period. The operating profit was Rs.3,959 crore, an increase of 7.3 per cent.

“We have done well in a quarter considered tough due to furloughs, holidays or less working days and headwinds in a few verticals such as energy, manufacturing and telecom while retail was soft,” said Vishal Sikka, CEO and MD, Infosys.

The net profit increased sequentially by 0.9 per cent and stood at $524 million for the quarter ended December 31, 2015. Infosys registered revenue of $2,407 million in Q3 up 12.5 per cent in constant currency terms. On a quarter-on-quarter basis, the company’s volume witnessed a growth of 3.1 per cent. “The healthy volume growth this quarter has been encouraging,” said U.B. Pravin Rao, president & COO, Infosys. “The lesser working days and our investments into additional trainees resulted in softer pricing and utilization for the quarter.” Market analysts believe that Infosys is back on the growth path again. “We are expecting to get back to industry leading growth in FY 17,” said Mr. Sikka.

“The management reiterated its outlook of industry leading growth in FY17, and considering the pickup in deal wins, strong volume momentum, traction in top accounts, we believe that it remains on track to deliver on that target,” said Ashish Chopra, VP – Research, at Motilal Oswal Securities Ltd. During the quarter ended December, the company added about 75 new clients taking the active number of clients to 1,045. The company also made a gross addition of 14,027 people in the quarter taking the total number of employees to 1,93,383 as on December 31, 2015. On a standalone basis, the company’s attrition rate declined to 13.4 per cent.

On a geographical basis Infosys major market North America declined by 0.6 per cent, while Europe grew by 2.1 per cent. In industry segment financial services and insurance grew 2.7 per cent, while manufacturing witnessed a decline of 3.7 per cent.

“We believe that newer initiatives like zero distance, design thinking, automation, etc will shore up the growth rates of Infosys and sustain margins over the longer term,” said, Dipen Shah, Senior Vice-President at Kotak Securities.

Infosys said the recent H1B visa fee hike may have less than 0.3 per cent impact on its margins.

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