Bangalore: For Rajeev, a 23-year-old engineering student from Varanasi in Uttar Pradesh, planning for a career in India’s $108 billion (around Rs.6.3 trillion) software industry began when he was a teenager.
“Where I come from, it’s popular to prepare for competitive exams and aspire to become an IAS (Indian Administrative Service) officer, or even attempt to become a probationary officer with a public sector bank,” said Rajeev, who will graduate next year in computer science from a top engineering college in Bangalore. He didn’t want to use his second name.
The planning gathered pace after Rajeev watched a YouTube video of the TEDIndia event in November 2009 that showcased the training facilities at Infosys Ltd, India’s second biggest software firm.
“There was a bowling alley, movie theatres inside a geodesic dome and hundreds of fresh graduates walking around. I envied them and decided to pursue a career in IT (information technology),” Rajeev said. He persuaded his parents to enrol him in a course that prepares students for the combined entrance test to more than 3,000 engineering colleges in India. After a year of preparation, he passed the exam and gained admission to the four-year bachelor of engineering course that he will complete in 2014.
That’s about as far as the plan looks like it will work because the world of the IT engineering graduate has changed dramatically since 2009.
Rajeev will find himself among a million fresh engineering graduates next year, most of whom won’t have a job waiting for them, unlike a few years ago. Meanwhile, his seniors who graduated this year have come to the disappointing realization that an offer letter no longer guarantees a job.
Rajeev has been forced to switch his career aspiration.
“I plan to sit for the probationary officer exams conducted by the State Bank of India because it doesn’t look like we will go anywhere with this degree,” Rajeev said in a phone interview on Monday.
The IT industry can’t employ all the engineers that India’s colleges are churning out as they themselves learn to cope with a leaner, meaner business climate. At least two generations of engineering students, including those graduating this year and the ones who passed last year, are realizing they don’t have anywhere to go. Only some of them, about 188,000, are expected to find jobs with India’s software firms. Until last year, the IT industry hired about 235,000.
But the challenge is not just demand, it’s also the quality of the graduates. According to an Aspiring Minds study in 2012, less than one-fifth of India’s engineers have the necessary skills needed at a top IT firm.
Already, India trains 1.5 million engineers every year, more than what the US (0.1 million) and China (1.1 million) jointly produce, according to an April 2013 report, How Many Engineers are Required to Change a Light Bulb?, by Akhilesh Tilotia and Kawaljeet Saluja of Kotak Institutional Equities, a brokerage firm. (Training refers to intake, rather than graduates.)
“We believe India is training more than double the requirement of its graduates every year; this is assuming that India is indeed even able to generate the 11-12 million overall employment opportunities every year,” the Kotak analysts said.
Over years, Tata Consultancy Services Ltd (TCS), Infosys and Wipro Ltd feverishly built their so-called pyramid model that involved hiring thousands of fresh engineering graduates annually and quickly deploying them on software projects to ensure overall costs remained low. The model depended on the traditional billing of services offered to customers such as General Electric Co. on a per-person, per-hour basis.
In order to make sure this pyramid was kept supplied, the number of engineering colleges in the country doubled to 3,393 by 2012 from 1,668 in 2008.
These colleges are now finding it hard to fill seats as demand slows, according to E. Balagurusamy, former vice-chancellor of Anna University in Chennai. Dozens of such colleges in Coimbatore and other south Indian cities are up for sale, but have no takers, he said.
“When the demand was there, anybody with a building and basic facilities could apply and get an approval to start an engineering college. They never bothered about the demand,” Balagurusamy said.
Experts such as Rishi Das, co-founder and chief executive of staffing and recruitment firm CareerNet Consulting, said the government and approving authorities failed to keep track of demand.
“The pyramid model is no longer looking like a pyramid, it’s looking more like an inverted pyramid. Jobs need to be added more at the worker level...the government has actually let everyone down at this level. These guys have been giving out licences to engineering colleges without actually consulting the industry on how many engineers they actually need,” he said.
Young people are now more open to looking at jobs in banks and, if they want to stick with engineering, at public sector units such as NTPC Ltd, Indian Oil Corp. Ltd and Bharat Heavy Electricals Ltd, Das said.
“After the sixth pay commission, if you look at the wages, they are also quite good. People are now realizing that since IT has come a full circle, stability is important—the payouts in public sector jobs are also not bad,” he said.
Probationary officer jobs in banks are increasingly being filled up by engineering graduates, he said. “There are some 40,000-50,000 jobs available for probationary officers in banks across the country and the advantage they have is that for these positions, they look for people who are strong in math, high aptitude—so quite a few engineers end up landing good jobs in that area,” Das said.
Trapped in transition
A generation of engineering students set to graduate next year has got trapped in Indian IT’s transition and will soon be burdened with unemployment and education loans as they face increased social pressure to find a job.
Amith R., 21, who hails from Shimoga district in Karnataka and a final year student in the electronics and communications department of Dayananda Sagar College of Engineering, is concerned about his debt. He’s taken a loan of about Rs.5 lakh at 11% interest.
Rs.50,100 crore, the report said.
If a new graduate gets a job with a monthly salary of Rs.15,000 as take-home pay, repayments on a Rs.1.75 lakh loan would account for at least one-fifth of that.
Amith has an offer letter from a top five Indian IT company, but remains sceptical about getting a full-time job there, after seeing what his seniors—some of whom are still looking for a job—are going through.
“What good is an offer if you haven’t got a joining date?” said Amith.
He is not alone. Venkatesh, 22, who graduated last year from a top engineering college in Tamil Nadu, got an offer letter from the same company in 2011 like many others in his batch. Nearly two years later, most of them are still waiting to join employment.
“When I first got into engineering (in 2008), I never imagined things would turn out so bad,” said Venkatesh. A month ago, he got a back-office job in Bangalore at a salary of Rs.10,000 a month. Five years ago, Venkatesh could have commanded a minimum Rs.20,000 monthly pay at a job that required his engineering skills to be used.
“It’s been an extremely frustrating wait and honestly I don’t know where to go,” said Venkatesh, whose father retired a few years ago and suffers from a heart condition. He has a younger sister in college.
The students of Dayananda Sagar aren’t the only ones to face a bleak future. Even top colleges in Karnataka, such as PES Institute of Technology, that pride themselves on full employment of all students, have admitted that 2013 has been a tough year in terms of hiring by top technology firms.
A placement head at one of Bangalore’s top engineering colleges said top companies such as IBM, Infosys and Wipro were deferring hiring plans for 2014 until they absorbed all the engineering graduates they had made offers to. “Frankly 2014 is keeping us on tenterhooks,” he said. He didn’t want to be named as he wasn’t authorized by the college management to discuss details about next year’s placements.
Apart from this, declining attrition rates at all the top IT companies mean there is a glut in supply.
According to All India Council for Technical Education figures, the annual intake of students at engineering colleges has more than doubled between 2008 and 2012. While in 2008 the intake was a little over 1 million students, the number stands at nearly 2.5 million for 2012.
In the same period, the number of fresh engineers hired by the IT sector has dropped to 235,000 in 2012 from 341,000 in 2008, according to data from Nasscom lobby group.
“Most of these companies are now maintaining a huge number of people on the bench. 30-40% of engineers are on the bench. If they are not getting new projects, how do you utilize those people?” said M.N. Guruvenkatesh, vice-president of placements at Dayananda Sagar Institutions.
The industry expects hiring to drop to 170,000 engineers this year, about half that in 2008.
“This year, the numbers are a little down compared to last year. Last year, most of the companies were hiring in good numbers,” said Guruvenkatesh. According to him, Infosys hired around 310 graduates and HCL 300 last year.
These numbers have more than halved this year at the top technology companies that previously used to pick up employees on a large scale from campuses.
Infosys has given offer letters only to 120 students at the college this year and said it may not hire at all next year, he said. “And even if they plan to hire, they may cut down to another 50%, which means 60-70. Most of the companies haven’t even visited this year. For example, Tech Mahindra...refused to come. They used to visit every year before this,” said Guruvenkatesh.
Another final-year student at Dayananda, Anirudha, has noticed a new trend among companies making campus recruitments.
Companies are seeking graduates who have already specialized in a particular area of software programming and coding to avoid having to incur extra costs on further training. This is in contrast with earlier, when the firms would take on those without such specializations as well, taking the onus of training on themselves.
“Now, since the jobs are diminishing, they’re looking for already trained specialists in some particular field that they’re recruiting for. For example, if they want a software engineer, they would pick someone from computer science, train him and make him a software engineer. But now they look for any branch guy who has training in that particular software that they’re hiring for, for example, Java, C++,” said Anirudha.
That feeds into the concerns over employability.
“The big problem is that we’re creating a large number of students who are unemployable. What happens is that when the costs go up and you’re not getting a certain quality of engineers, then the companies face a problem. The reason why they came to Bangalore was the availability of cheap trade manpower. And that has declined, partly because the costs have gone up and partly because the quality has gone down,” said Narendar Pani, a professor at the School of Social Sciences at the National Institute of Advanced Studies.
The problem, experts said, is that large software services firms are attempting to move away from commoditized services and earn more from high-end product and consulting projects, but the talent is not skilled enough.
“What we have been producing so far are programmers, not engineers,” said Balagurusamy, formerly of Anna University.
While the crisis is set to worsen in the years to come, one area has emerged as a beacon of hope for these students—India’s nascent, but emerging start-up scene.
Lack of enough cushy IT jobs will help start-ups looking for engineering talent, according to K. Srikrishna, executive director of the National Entrepreneurship Network that promotes student entrepreneurs. “If you look at Nasscom’s plan to create 10,000 start-ups, each of them will need up to 10 staff, that means 100,000 jobs,” he said.
With mass recruitment from the likes of TCS, Cognizant, Infosys and Wipro largely becoming a thing of the past, most top and mid-tier colleges are welcoming start-ups to their campuses. The number of start-ups visiting campuses is also rising with each passing year.
For Purvi and a few of her batchmates from one of Bangalore’s top engineering colleges, start-ups provided a way out during a year when the jobs crisis in the IT sector hit a new high and saw fewer jobs being created than during the financial crisis year of 2008.
Having graduated in computer science this year, she recently started interning at a start-up called FindYogi, a pricing comparison website. “Start-ups have been a huge boost for people who are graduating this year,” Purvi said. “When we joined engineering in 2009, we were all praying that the recession would blow over by the time we graduated. Sadly that never happened.”
Another example is Srinivas K., a 22-year-old final-year student at the Indian Institute of Technology (IIT), Madras, who recently got an offer from a start-up called Housing.co.in, which helps people in different cities find flats and apartments that are up for sale or rent.
“It’s a big myth that everyone from IIT ends up with a plum job,” said Srinivas, who designed a mobile app recently that tracks a few bus routes in Chennai and informs commuters about bus arrival times.
This is the second in a three-part series that examines how various constituents of the Indian IT ecosystem are dealing with the fallout of the global economic crisis.