India’s $154 billion IT industry, touted as a showpiece of the country’s soft power for well over two decades, is confronted with its moment of reckoning. The four-million employee industry that associated itself with the IITs, front line business schools and the Silicon Valley, represented a ‘new India’ which was aspirational, unleashed and made a mark in those parts of the world which mattered the most. The irony of moment is that the showpiece appears to be wearing off. The front line IT firms are now in the news not for hiring but firing. Reports suggest that as many as 56,000 middle level engineers may be fired in the immediate future, but what is quite disconcerting is a report by an executive search firm which says that over two lakh jobs may be lost every year for the next three years. It is quite alarming because this kind of job loss not only creates a huge disruption but also dents the confidence of an industry that had earned the reputation of creating a mass, white-collar employment for young boys and girls who then, as empowered consumers, leave a big positive spin-off for the rest of the economy.

Unfortunately, on their part, the industry leaders have not done themselves any good by taking upfront narrow issues like salaries of CEOs and CFOs when it was the real challenge of redundancy from digitisation and protectionism in the US and Europe that had to be tackled head on. Even today, some of the well-known firms want to be in a state of denial and blame job redundancies on unconvincing “annual performance reviews.”

Unlike most other sectors like telecom, power, steel and real estate, the IT companies are  sitting on big cash piles. But instead of using the large reserves in their balance sheets to upgrade employees’ skills and training along with acquiring new technologies, top software firms are spending a large part of the same for strengthening shareholders’ valuation in stock markets through buy-back of stocks. At best, it is a lopsided way of improving shareholders’ valuation.

The best way to go about would be to use these resources to take some margin cuts on the balance sheets in the short run and acquire global companies possessing unique technology and skill sets which enable the catch-up with automation, artificial intelligence, machine learning and other evolving practices. Having found themselves behind the curve, Indian firms can still recoup their lost ground, if the ongoing challenge is taken as yet another opportunity to create a model that diversifies geographical, political and business risks. The Indian IT industry is too precious to be lost.