Monday, September 12, 2016

IT: Extinction of mass market and the rise of a new class

Recent technological advancements in IT industry are reshaping the whole industry. The march of automation will eliminate thousands of low skill jobs in the sector in the years to come. Already growth has stalled in most of the IT services businesses. Adapting to new measures becomes inevitable for them. Do you remember how much buzz BPO companies were making ten years ago? Observe how they got transformed over time. If not same, similar process is underway for IT industry too. Hiring in big numbers will become a thing of past. When the profitability gets hurt, industry consolidation begins, and that would consume one of the top four IT services companies in India as mergers gather pace. By then you would accept, IT has ceased to be a mass market. But that is only one side of the story. The other part is very rosy.


Take a look at the snapshot taken from Naukri.com portal. In the e-commerce sector alone, there are more open positions in the 50-75 lakh salary range than in the 25-50 range. There are 31 jobs offering a 1 crore + pay per annum. Yes, this is in India. And these are not CxO jobs. But two-three levels down from top job and many of them are techno-functional jobs. When the business opportunity is huge, employers do not mind paying a hefty package. And the expectation is high too. An average IT engineer won’t do for them. He/she should be a geek, with skills of product design and development. In other words, the person should be a world class talent. For those top talents, the pay too is world-class. These high pays will effectively reduce the gap between those working in the US and in India. Employers do not mind the geography but will care for the talent instead, that is the trend which is evident by the pay offered and the number of open positions in that range. Currently this trend is limited to niche sectors but I do expect it to rub on other sectors too, but with a time lag. So in a decade from now, it would not matter if one is working in the California or Bangalore, wage gap will shrink and pay would become comparable (not exactly same due to economic parity) for the same skill sets. A nice trend for those who have right skill sets.

Low skilled jobs will be automated and they will have to move to other sectors and the pay outside IT is catching up too. Keep in mind seventh pay commission amendments. And for the top talents, they need not line up in front of US Consulate office for a visa, they will the get right job and the pay here in India. Did you ever wonder who would buy those Rs. 2.5 Crores villas and the Jaguar, Land Rovers? They will not be limited to CxO and NRI’s, a new class is getting elevated. In the short term, it may look like they are an island in an ocean of poverty but eventually the benefits will spillover as they will take up the domestic economy too with them.