Bangalore: When Shantanu Kumar, 23, graduated from one of Bangalore’s top engineering colleges last year, he had a job offer from HCL Technologies Ltd, India’s fourth largest software services company. With an education loan to pay back and under pressure to start earning a salary soon, Kumar was all set to join the nearly 2.5 million professionals working in India’s $100 billion (around Rs.5.4 trillion) information technology (IT) industry.
That hasn’t happened yet. The initial job offer from HCL Technologies has been followed by a dozen emails and several mobile phone text messages from the company delaying his joining date.
“I am now wondering if I should have followed some of my schoolmates who opted for civil engineering and not computer science,” said Kumar.
For the first time since the global financial meltdown that followed the collapse of Wall Street investment bank Lehman Brothers in September 2008, when top outsourcing customers shelved projects and cancelled ongoing work, India’s top 10 software services exporters will hire around 150,000 engineers this year. They hired around 200,000 last year and some 400,000 during 2006-2007, when demand for outsourcing was at its peak.
The 150,000 gross hiring estimate for this year includes lateral hires and recruits overseas, said an official at Nasscom, the industry lobby, on condition of anonymity.
This time, it’s not only because of slowing economic growth. These companies are pushing more aggressively to gain revenue by adding fewer staff; their attrition rate—a measure of employees quitting jobs—has declined sharply, meaning they don’t need additional staff. Revenue growth in the past five years was less than half the pace from 2003 to 2008.
After years of complaining about double-digit attrition rate, India’s top technology firms are realizing that they may not need to hire as many fresh engineering graduates this year because the number of employees quitting their first jobs is at an-all time low.
The attrition rate at Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd is down by anywhere between 5% and 10% from a year ago. TCS, for instance, reported a 9.8% attrition rate in its IT services business during the December quarter—the first single-digit rate in several years. India’s second biggest software firm Infosys has over 40,000 staff on the bench waiting for projects that can be billed.
So if Kumar is not getting an immediate placement, he can also blame campus recruits such as Bhargavi, 25, who joined one of the top five tech firms in June 2011, and is yet to quit.
“Unlike a few years ago, there are no jobs available for those with three years’ experience and even if you get it, the salary levels do not justify the shift,” Bhargavi said in a phone interview, requesting her second name not be mentioned.
Already, the $70 billion software services exports industry is now generating every additional $1 billion in revenue with less than half the number of engineers it needed until 2003—an early indication that the country’s top tech firms are earning more from high-end projects that require fewer people.
“When we double our revenue to $20 billion, we do not plan to be a 500,000 (employee) organization,” said Ajoy Mukherjee, global head of human resources (HR) at TCS, which now has 263,637 people on its rolls. For the year ending March 2013, TCS would have hired 43,600 fresh engineering graduates. But next year, it plans to hire just around 25,000 from the campuses.
“Our campus joining ratio (the percentage of students actually joining the company after they are offered a job) is also higher than past years at over 70%,” said Mukherjee.
The trend has been apparent for a few years now, and it’s started showing results. For instance, in 2003, when India’s software exports were worth $9.5 billion, firms such as TCS and Infosys needed 37,798 engineers to earn $1 billion. In the year ended March 2012, the industry added 19,783 people for every additional $1 billion in revenue, according to Nasscom.
Firms such as TCS say that while there is a stronger push to delink revenue expansion from employee growth rates, overall hiring plans will remain unaffected as long as orders in the traditional business of software applications development and maintenance keep coming.
“As long as the legacy business keeps growing, we do not see any slowdown in hiring,” Mukherjee said.
An increasing proportion of non-engineering graduates (arts and science graduates) in the workforce, slower growth (compounded annual growth rate of 14% in 2008-2013 against 33% growth between 2003 and 2008) and an overall drive to delink revenue from payroll growth is causing a massive shift in hiring plans at technology firms.
“Non-engineering graduates for us are still less than 10% of the total workforce, but that base is increasing very, very fast,” said Saurabh Govil, senior vice-president of HR at Wipro.
Executives at the country’s top four software firms and Nasscom confirmed lower hiring this year.
“With the trends that you mentioned, the engineering hiring numbers would drop. We do not have a talent demand forecast as of now, we are working on that piece,” said Achyuta Ghosh, head of research at Nasscom, who is interviewing member firms on their hiring plans before putting out an official estimate.
He added that it’s time now for shifting the focus away from the volume of engineering graduates produced every year and work on improving the so-called employability—a person’s ability to get and hold a job—of these graduates.
“Companies often complain about how they are not getting enough candidates for these high-growth services, but we still seem to be churning out students with the same skills that were required by the industry 10 years back. Unlike other industries, my point is that the IT industry is extremely fast evolving, and there is a need for the education system to keep evolving too, to supply appropriate manpower,” said Ghosh.
Some companies said the industry needs to seriously consider re-skilling the 1 million engineering graduates and diploma holders joining the job market every year.
“With so many engineers being produced in India each year, perhaps we will need to look at re-skilling some of our talent, introduce new courses and broaden existing academic disciplines to ensure that the talent we are grooming today in our universities can meet the needs of the dynamically changing industry,” said Nandita Gurjar, senior vice-president and group head of HR at Infosys.
Infosys expects one-third of its revenue to come from newer technologies of cloud computing, mobility and software products. The skill sets required for such work are completely different from just software code writing or application maintenance.
“In the technology sector itself, areas like big data, cloud, mobility are coming up in a big way. Therefore, I believe it is important for students graduating in these times to focus on upskilling themselves, which will equip them to leverage the opportunities available to them,” said Gurjar.
Infosys also plans to increase the proportion of non-engineering graduates, analysts at Citigroup Global Markets Inc. said in a research note on 22 January.
“Currently, campus hiring leads demand by around 2 years—Infosys is looking at converting the around 7 months training period to a mix of online/classroom training,” Citi Research analysts Surendra Goyal and Rishi V. Iyer said.
Two of three chief executive officers (CEOs) at India’s top 10 software exporters said their biggest concern is to arrest the ballooning payroll.
“In a new service line we are launching this year, there is scope to trim the staff strength by more than half—we are exploring ways to redeploy some of them,” said one of the CEOs requesting anonymity because these are internal plans.
Another factor for lower hiring this year is higher growth in computer infrastructure management and back-office projects. These projects do not require specialized engineers, and can be executed by arts, science and even commerce graduates. Also, the potential to automate these processes is much higher than traditional software application work.