For the past two months, software engineer Sanjay has been looking for work after being laid off from a top IT firm, joining many others who are losing their jobs across India's software industry.

Mr Sanjay, 45, who has been working for two decades without a break and was in his last job for seven years, is finding the going tough because of a slowdown in hiring across the industry.

"I was suddenly asked to resign. I refused, and they said here is your contract and we are giving you two months' notice," said Mr Sanjay, who did not want to give his last name fearing it would hurt his re-employment prospects.

He is the sole breadwinner of his family and supports his wife, two children and mother.

"The slowdown (in the software industry) happened in 2002 and 2008. This time it is extraordinary.

"It's difficult because we get used to a certain lifestyle. Expenditure remains very very tough to manage," he said.

India's IT services industry, which is worth US$150 billion (S$204 billion), has grown over the past three decades, driven by demand from the United States and other countries to provide services at lower costs through a steady supply of cheap labour.

The industry employs nearly four million Indians, according to the National Association of Software and Services Companies (Nasscom).

But growing protectionism in the West, coupled with new technologies such as artificial intelligence, robotic process automation and cloud computing, is taking a toll on the software sector by squeezing profit margins.

Multinational firm Tata Consultancy Services' second-quarter results - released last month - showed net profit dipped marginally to 64.46 billion rupees (S$1.36 billion) from 65.86 billion rupees for the same quarter last year.

Nasscom has predicted 7 to 8 per cent growth for the software industry this financial year. By comparison, China's software industry expects double-digit growth.

The business model has changed, experts say. For example, the old model of sending engineers at a fraction of the cost for on-site work to other countries is outdated, with clients now looking more at technology solutions.

"All (software firms) are showing lower profit margins. As a result, they want to cut down on costs and the biggest cost, at around 60 per cent, is manpower," said Mr Kris Lakshmikanth, chairman and managing director of executive search firm The Head Hunters India.

"What has also happened is that digital technologies are disrupting the sector. There could be a start-up in San Francisco or Chicago providing an app at one-tenth of the cost of an Indian company."

He pointed out that companies like Infosys grew because they quoted 50 per cent less than US firms. "Now the same thing is happening to them," he said.

And he noted that graduates with specialised skills in automation were few, with most graduates versed in basic coding skills.

Mr Kumara Swamy A.C., president of the Information Technology Employees Union, said it was advising members not to take housing or personal loans, and to upgrade their skills to automation, big data and cloud computing.

He said there was widespread gloom and panic in the sector, and he expects the IT industry to employ far fewer people in future.

"People are getting midnight calls asking them to resign. Some companies don't even drop an e-mail. They simply call the person to the conference room and say, give up your ID... Today is the last day: don't come tomorrow."

Salaries for senior software staff with a little under a decade experience can be 2 million rupees or more. In the US, salaries for project managers, for instance, are around US$60,000 annually, which is the salary of three project managers in India.

And surveys are not holding out too much hope for software engineers.

According to the Experis IT Employment Outlook Survey released on Oct 10, IT hiring will further slacken between October and March next year.

The survey of 500 Indian IT employers across India found that a majority of them want trained graduates or young employees who are already skilled in the latest technologies.

Mr Manmeet Singh, president at Experis ManpowerGroup India, said: "Today, technologies continue to rapidly reshape the business landscape.

"A rise in new enabling technologies, such as... cloud-based enterprise resource planning software, artificial intelligence's unprecedented speed, accuracy and cost efficiency is significant to maintain the competitive edge which is driving the businesses now."

Enterprise resource planning software allows organisations to automate many back-office functions related to technology, services and human resources.

"With this ongoing transformation, these technologies bring underlying technical complexity which spurs the demand for young professionals," added Mr Singh.

Companies said they had no choice but to move away from the old way of doing business.

Tech Mahindra, a leading software firm, said it was reskilling employees in line with new technology and noted that clients want more technology solutions.

At the same time, the company is looking to acquire start-ups.

Said Mr Jagdish Mitra, chief strategy and marketing officer and head of growth factories for Tech Mahindra: "It's the perfect storm and we all have to change... I don't think we have a choice. It's a matter of being relevant and being able to exist...

"The factory approach, which is looking at linear growth, is going to change to a non-linear combination of offering platform and services rather than just services.

"Lay-off cycles have primarily happened because most of the time performances have not been good or most of time skill levels did not match, and some of the businesses have changed," he added.

Still, laid-off workers and the union maintained that companies were also letting go senior engineers as part of the effort to increase revenues.

Mr Ramanathan, who goes by one name, was laid off from an IT firm two months ago.

A project manager with two decades of experience, he said he had been getting consistently good ratings during his appraisals until this year, when his rating went down to poor.

"Nobody discussed my rating with me. Then, they asked for my resignation over the phone and I was laid off," he said.

He has filed a case with the labour commission.

"I will fight this."