IT jobs, once considered to be a stepping stone towards a rewarding career, have steadily lost their charm because of increasing automation and oversupply of qualified manpower, according to a report by Kotak Institutional Equities.
The nearly $150 billion domestic IT industry has taken to automation in a big way. Accenture, Cognizant, Infosys, TCS and Wipro - the biggest recruiters of Indian IT employees - are all in the process of automating a significant part of their work.
The result of large-scale automation is evident - net hiring in the IT sector has remained stagnant at 2.5 lakh over the last five years, says Kotak. According to McKinsey, the IT industry, which created 3 million jobs for the first $100 billion of revenues, may create just 1 million jobs for the next $100 billion of revenues.
Entry-level IT employees have so far borne the brunt of increasing automation as their work is more susceptible to being automated. However, the impact of increasing automation may soon travel up the organization, Kotak's Akhilesh Tilotia said.
This means, many mid-level professionals - say those in the 8-15 years of experience - will need to equip themselves with skills required much lower down in the hierarchy, the report noted.
"Given the expected growth rate of 10-12 per cent per annum in the industry and 30 per cent automation over the next 3-5 years, the race will be a close one for the middle management to keep their jobs," the report said.
Meanwhile, IT salaries will continue to remain under pressure because of oversupply of manpower. According to Kotak, 1.3 million engineers graduated in 2014-15 as against net hiring of just 2.5 lakh engineers (including lateral hiring) last year.
The oversupply resulted in moderation in salary hikes from low-to-mid teens historically to high-single digits now. Fresher salaries, which have remained unchanged at an average of Rs 3.25 lakh per annum, are likely to remain unchanged in the next few years, Kotak maintained.
Salary hikes could moderate further to mid-single digits in the coming years because of the glut of freshers, the report notes. More importantly, low salaries can "percolate" upward to the middle management, Kotak said.
"As a large batch of not-so-well-paid freshers learn and grow in the system, they are more likely to impact the growth in pay of the seniors as the ratio of the pay-scales begins to look distended. It is quite possible that low-growth industries may see a correction in the salaries of the seniors," the report notes.
Unionization in IT Industry
Sluggish hiring and salary hikes could lead to invasion of trade unions in the IT industry, says Kotak.
"This may sound far-fetched but we think of this as a near-term possibility. Unionization, however, will not be in the traditional sense but through self-help groups formed by people through social media platforms like Facebook and Twitter," the brokerage said.
The nearly $150 billion domestic IT industry has taken to automation in a big way. Accenture, Cognizant, Infosys, TCS and Wipro - the biggest recruiters of Indian IT employees - are all in the process of automating a significant part of their work.
The result of large-scale automation is evident - net hiring in the IT sector has remained stagnant at 2.5 lakh over the last five years, says Kotak. According to McKinsey, the IT industry, which created 3 million jobs for the first $100 billion of revenues, may create just 1 million jobs for the next $100 billion of revenues.
Entry-level IT employees have so far borne the brunt of increasing automation as their work is more susceptible to being automated. However, the impact of increasing automation may soon travel up the organization, Kotak's Akhilesh Tilotia said.
This means, many mid-level professionals - say those in the 8-15 years of experience - will need to equip themselves with skills required much lower down in the hierarchy, the report noted.
"Given the expected growth rate of 10-12 per cent per annum in the industry and 30 per cent automation over the next 3-5 years, the race will be a close one for the middle management to keep their jobs," the report said.
Meanwhile, IT salaries will continue to remain under pressure because of oversupply of manpower. According to Kotak, 1.3 million engineers graduated in 2014-15 as against net hiring of just 2.5 lakh engineers (including lateral hiring) last year.
The oversupply resulted in moderation in salary hikes from low-to-mid teens historically to high-single digits now. Fresher salaries, which have remained unchanged at an average of Rs 3.25 lakh per annum, are likely to remain unchanged in the next few years, Kotak maintained.
Salary hikes could moderate further to mid-single digits in the coming years because of the glut of freshers, the report notes. More importantly, low salaries can "percolate" upward to the middle management, Kotak said.
"As a large batch of not-so-well-paid freshers learn and grow in the system, they are more likely to impact the growth in pay of the seniors as the ratio of the pay-scales begins to look distended. It is quite possible that low-growth industries may see a correction in the salaries of the seniors," the report notes.
Unionization in IT Industry
Sluggish hiring and salary hikes could lead to invasion of trade unions in the IT industry, says Kotak.
"This may sound far-fetched but we think of this as a near-term possibility. Unionization, however, will not be in the traditional sense but through self-help groups formed by people through social media platforms like Facebook and Twitter," the brokerage said.
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