Will WFH be the new normal for the IT services outsourcing industry post Covid-19?

The Covid-19 pandemic has shaken up the Indian information technology (IT) services industry. Getting a four-million strong workforce to work from home is not an easy task. Still, the industry seems to be holding up well, at least for now. 

The first six days of the 21- day lockdown have seen IT companies scramble to get as many employees to work from home as possible. An estimated 20-30% of the workfoce has been reporting to offices to maintain critical functions. The government has classified the IT industry as essential services, giving companies some flexibility to manage operations. 

The IT services industry will have to restructure its business continuity plan (BCP) to cope with the lockdown. 

In fact, this crisis might help IT companies over the long term, with more customers getting comfortable with outsourcing their work to remote locations, industry watchers say.

Tata Consultancy Services has claimed that it has implemented work from home (WFH) for more than 85% of its employees, while Infosys has 70% of its employees working from home.

However, Tech Mahindra seems to have left its peers behind, claiming that it has enabled WFH for all its employees even in the mission-critical and sensitive projects.

Current pain points for IT companies include lack of laptops and infrastructure— most employees still work on desktops, unstable internet connections and poor mobile networks. Employee productivity and data privacy are other key issues. 

For service companies, the work from the home model has lower efficiency because most teams have people with varied skill levels within teams, with a fairly large proportion of freshers, Mohandas Pai, former HR head and CFO of Bengaluru-based Infosys, said.

Unlike the large multinational product companies such as Microsoft, Oracle or SAP, “freshers”  constitute a large percentage of Indian IT services with the industry-wide average at around 25-30%. Freshers is a term used in the industry to describe entry-level employees — typically with 0-3 years of experience. 

Not everyone is impressed with the way the Indian IT industry has responded to the crisis. 

"They have not figured out a way to deliver services with very little or no humane intervention. Distributed software development was practised for specific projects but not possible for every project. Also, the industry works with more freshers which requires more guidance and mentoring for writing codes," V Balakrishnan, former CFO of Infosys, who currently runs a venture capital fund Exfinity Ventures, said.

According to Phil Fersht of HFS Research, an IT outsourcing consultancy, the current crisis has laid bare the poor design of BCPs and fragility of the outsourcing industry, especially in India.

"Executives are telling us they have never seen such widespread implementations of business continuity in their multi-decade long careers. For their clients, while more measures from key offshore locations are understandable and, frankly should be applauded given their laissez-faire approach thus far, could still not come at a worse time," Fersht wrote in his blog post.

However, Pai disagrees. According to him, IT companies will move to solve these challenges using technology. The firms might even end up opening more remote location offices in smaller towns and co-working spaces near employees' homes.

"From this experience, IT companies will create a mobile workforce which can work from anywhere using strong technology to connect. The one-line infra will become more robust as companies will pay more for this. The gig economy will expand and IT firms will reduce its fixed cost," he said.

One of the biggest impacts that Covid-19 will have on corporates is a shift to remote workplaces, Sanat Rao, managing partner at San Francisco-based Shyn Capital, a venture capital firm that bets on blockchain and digital assets said.

"It is estimated that one-third of the US workforce is already working remotely as of March 25.  Low-cost seamless video conferencing (zoom) and collaboration tools (Slack, Trello, Notion etc.) are helping this rapid transition to remote companies. I anticipate that remote workplaces are here to stay and many future companies will setup as 'remote first'" accelerating the technology's move away from big cities across the world," Rao added.

IT companies in India have faced occasional shutdowns due to local issues such as Cauvery riots in Bengaluru, the Chennai floods and the statehood agitations in Hyderabad. These small problems had somewhat prepared the companies to have a sort of a contingency plan. But, nothing could have prepared them for a complete lockdown and potential data privacy issues. 

"During this crisis, we have seen customers being flexible and relaxing cybersecurity and data confidentiality norms while IT companies and governments allowing employees to take the laptop outside the office premises. This was not about rules, but how we can change rules to address the evolving situation," Pradeep Mukherji, president and senior partner with digital consulting firm Avasant, said.

Mukherji said that with a large set of customers now being forced to accommodate, this will also cause mindset change. "Many customers were more concerned about data security than was required or relevant. And having offices in multiple locations and employees handling thier BCP from their own houses ensure continuity of business, he said.