Tech job loss: Who moved my cheese?

For years, the people who worked in the tech sector were the cynosure of all eyes - they were the ones who made big bucks, grew fast, jetted in and out. Yes, they continue to be the cynosure today also, but albeit for a different reason - will they have a job tomorrow, have they become rapidly obsolete, will they form an employees union like all others!

This is the story of the middle 70%; as far as the top 20% - life continues to be even better!

My campus grad chat...

I recollect that way back from 2010, when I used to meet our new hires from college - I would ask a simple question. What would you like to be in say 5 to 10 years down the line? 97 out the 100 in the room would respond - I want to be a lead or a manager. Further probing them - many would not know what it meant (except they have heard your grow into that); and the few who answered would say - I will be getting work done by others.

In the prior 15 year period the Indian tech sector had grown over 25 times in head count to nearly 2.25 million people. In terms of revenue we grew from about 2+ billion USD to nearly 70 B USD. The salary in this period grew at a compounded 12% - 15% comfortably. The average campus grad salary had moved from 60K to 3.5 L INR. In 15 years they were earning about 15 - 25 L INR.

Before I continue with the campus grad chat - let us have a quick look at the scenario from three different angles - The people angle, the revenue angle, the share price angle.

The people angle

The industry did not have a staircase to grow. Instead, it was like getting into the first step of an escalator, and if you made no stupid move, you would have only one choice - you would soon reach the next level, automatically! If you were willing to put in a little more (i.e. climbing up even on an escalator), you would move up even more quickly. When you reach the next level, move a few steps and take the next escalator... and thus it was a great life!

The reality was that the whole industry could not have grown at that dizzying pace - 25x to 30x in 15 years!

I think the early signs of challenge was already visible for the discerning few (but they would have been branded as 'skeptics' by the rest including the industry leaders).

The first signs came out, when the campus grads salary started to stagnate (nearly) the same for several years. Adjusted for inflation, it meant that the real salaries at the entry level were going down.

The other signal that came out soon was the slowdown in campus hiring, deferring the start dates, and at the extreme revoking the offer itself. But definitely the number of campus grads that were hired had gone below the peak.

Most people in the industry were used to promotions every 2 years or so. Now it was 2 years for the top rung, and slowly it increased a quarter or two every year... so people were at the same level for longer 3 - 5 years. Sometimes people even got a promotion after a long wait, but the salary did not change! (Something the vast majority never thought or dreamed of even!)

Soon the scorching pace of salary growth started to ease out. From 15% - 25% on an average to high single digit. When this compounds over a period of time - you can see a visible slowing down of the earning.

The revenue angle

The industry was built on a pyramid model. The revenue was very clearly linked to the head count deployed. It was a simple arithmetic - A billion dollars for every 20 K - 30 K people. It looks like a big range. In reality, each organization was pegged at some number on this scale, and the improvement from that over the years has been marginal. It meant your revenue per person was nearly stable (save the benefit of a depreciating rupee).

The industry that grew from 2+ B USD to 70+ B USD in 15 years, cannot replicate the same 30x again isn't it (we would be 2T USD by 2025, which is practically all the money the world would spend on tech services!) Our growth had to moderate - we are now in the upper single digits, as an industry.

Before I continue with the campus grad chat - let us have a quick look at the scenario from three different angles - The people angle, the revenue angle, the share price angle.

The share price angle

The tech sector stocks were the darling of the market. If you bought almost any tech sector stock (forget the Satyam aberration for a moment - it is a different story altogether) you were seeing it's value steadily provide a return much higher than the market.

A look at the last few years will tell a different story (when you take the collective industry position). They are just about providing a market return, and the look ahead is no longer that rosy.

... My campus grad chat

As a business leader, I felt it was my responsibility to tell them that this escalator story is not perpetual. Yes, those of us who got in when the escalators were freshly rolled out, made hay! Today those escalators have become like stairs with too many people already in each step of the stair.

I used to tell them half-seriously and half-in-jest - you would be like the 10,000 INR watch from Mega Mart (sorry, Mega Mart - that is the nature of your business!) which would be given free when you bought 5 trousers worth 7,500 INR. We all know how little we would value those watches.

So, it was time for them to think differently and not follow their predecessors (who were successful in an era gone by!). Also, they had to look out and find what would make them valuable - it was most likely to be an individual contributor for a much longer time. Also, with experience, they would be looking at a far higher salary - which meant they had to provide a far higher value as an individual contributor.

Some took it to their heart, the majority of them just ignored it...

In conclusion

Well, it has been over 7 years in my view, that we had got visibility of this impending situation. It was never a question of "if", but just a question of "when".

Your cheese was steadily moving away, a little at a time, in front of your own eyes. You have been oblivious to that, thinking it was the cheese of someone else that was moving; or you were very hopeful that the speed at which your cheese was shrinking, you would have been done with the need for the same. Or you made the implicit assumption, that your organization will replace the cheese with a new one in your cellar!

So it's time to act, before your cheese completely vanishes! Depending on your state, you need to build the skills you need for your new cheese. I have given my approach to building new skills in the post - Job at risk: Up-skill, Re-skill, or Down-skill?

As always, looking for your valuable insights and perspective.