Campus hiring is buzzing again as IT companies bulk up on freshers to fight talent war

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In September 2014, Vellore Institute of Technology, one of the top hunting grounds for IT companies, entered the Limca Book of Records for the fourth consecutive year. The feat? It placed the maximum number of students in a single slot through its campus placement drive for the batch graduating in 2015.

Four IT companies recruited more than 1,000 students each, with Cognizant alone picking 1,911 students. The same year, TCS created a record by hiring 1755 in SASTRA University.

 While the heady hiring numbers came down for many campuses in the last few years as the IT industry was grappling with technology shifts and slowing growth, campus hiring is now roaring again thanks to the accelerated shift to cloud and digital post pandemic.

IT companies are trying to address the issue of high attrition by having a higher pipeline of freshers, whom they can hire, train and deploy, at a much lower cost than experienced professionals or laterals. It also helps improve retention, amidst an unprecedented hiring boom.

IT firms turns to freshers as laterals talent gets costlier

As the war for talent and resulting high attrition pushes up salary costs, IT firms are taking conscious steps to increase fresher hiring to retain the workforce.

Top four Indian IT firms plan to hire 1.1 lakh freshers in FY22. US-based IT major Cognizant, which employs the majority of its 3 lakh workforce in India, will recruit 30,000 freshers in 2021. This is considering only the top five companies.

The numbers will further increase next year. HCL Tech and Wipro will hire 30,000 each next year, up 30 percent from what they hired last year. Its US peer Cognizant said during the recent earnings call that the firm will hand out 45,000 offers to freshers, who will join the firm next year. Other companies are likely to follow suit.

This is also a refreshing change for campuses, which had seen hiring decline in the last few years after the boom in the beginning of the last decade.

Decline in fresher hiring

Early 2010s were a high when it came to campus hiring. After a blip in hiring following the global financial crisis in 2008, companies were hiring in hundreds in campuses and every year it reached a new high.

For some of the graduates during this time, the whole affair was more like “hiring mela” (hiring festival), given the rate at which the graduates were getting placed. In 2011, Infosys’ then CEO Kris Gopalakrishnan told the media that to top five IT firms in the Indian IT industry will hire about 1.6-1.8 lakh people that year.

However a lot has changed since 2015-2016. A placement officer of one of the leading engineering colleges in Bengaluru, who did not want to be named, explained, “Campus placements till 2015-16 was an altogether different ballgame, where there was bulk recruitment. Companies would recruit close to 500 each every year.”

A former IT executive said that the decline came at the back of softness in the US markets, the largest market for the IT services companies, and changing technology landscape that demanded a skilled workforce resulting in layoffs. Between 2016 and 2020, there were multiple reports of top IT firms laying-off the workforce leading to the formation of an IT union in the country for the first time. In 2017, Tamil Nadu and Bengaluru got their first IT unions, Forum for IT Employees (FITE) and Karnataka State IT/ITeS Employees Union (KITU).

However, on the back of COVID-19 and resulting demand, campus hiring is returning.

Buzz in campus hiring

Recruitment by IT services firms usually begins late August/September and goes on till March. But going by the trend in engineering colleges, where placements have already begun with multinationals, students and colleges are in for record placements.

Close to 81 students from the Vellore Institute of Technology are hired across multinational firms such as Microsoft, Amazon, PayPal and Morgan Stanley with a salary of Rs 25 lakh. Dyte, a video calling platform based in India, has offered Rs 75 lakh in annual salary to two students, the highest so far in the campus.

Samuel Raja, placement officer, Vellore Institute of Technology, said the hiring momentum this year has been similar to what they saw in early 2010s. With the hot talent market, the college has seen the salary offered by some of the product firms go up from average Rs 20 lakh per annum to Rs 45 lakh this year, he added.

A student placement volunteer in an engineering college in the North, who did not want to be named, said a US-based multinational has offered an unprecedented Rs 52 lakh annual salary.

For instance, Chandigarh University has beaten its own record in campus placements with 7,412 offers made by 757 multinationals during the pandemic, according to a report, 12 percent more than last year. In addition, the number of companies that are offering Rs 20 lakh per annum have also increased 10 percent for the 2021 batch.

At BITS Pilani campuses, 21 percent more students were placed in companies that offered Rs 20 lakh salaries compared to last year, according to media reports.

Why the boom?

“The pandemic has materially accelerated the digital transformation agenda of large corporations, leading to an outsized hiring of talent with new-age skills. With large and mid-sized IT services companies bouncing back to double-digit revenue growth, as well as global captives feverishly expanding their base in India, we are seeing an unprecedented war for talent,” said Ramkumar Ramamoorthy, Pro Vice-Chancellor for Professional Learning at Krea University and former Chairman and MD, Cognizant India.

“I would not be surprised if the top 10 technology companies alone see a net headcount addition of over 200,000 employees in India this financial year,” he added.

There are two key drivers for the hiring momentum.

One, this is a business shift driven by technology and not merely a technology shift as companies adopt digital to ensure business continuity. Two, in prior technology shifts driven by Mainframe, or Client-Server and Internet, opportunities thrown up were largely driven by one technology. “Today, what we are witnessing is a confluence of technologies—including Machine Learning, Artificial Intelligence, IoT, Cloud, Data and Analytics, Augmented Reality and Cybersecurity—that are driving changes to the business, operating and technology models of companies. As such, this will be at least a decadal opportunity, if not longer,” Ramamoorthy explained.

A former IT executive, who did not want to be named, pointed out that most of the new age technologies are coming off from a period of experimentation and have become mainstream now. “When every company is talking about 30-40 percent of the revenue coming from digital it is a clear indication that the things have gone mainstream and scale, which is a reason why you are seeing very large numbers for hiring,” the executive added.

Though the demand for laterals is at a high due to acceleration in demand, the balance is tilting towards freshers, going by executives’ commentary as they plan for the long term.

IT firms hiring

Currently for most IT firms, lateral hiring outweighs fresher hiring. For instance, take HCL Tech. Fresher hiring accounts for about 35 percent and lateral hiring stands at 65 percent. The company is now taking a conscious effort to step up its fresher hiring to about 70 percent in the next couple of years.

In a recent interaction with Moneycontrol, VV Apparao, chief human resources officer, said that having a higher fresher pipeline addresses the issue of high attrition amid the hiring boom the IT industry is seeing, filling the gap in terms of skills such as cybersecurity, where there is a crunch, and also the challenge of salary inflation.

Currently the cost of quality talent has skyrocketed with candidates demanding a hike as high as 100 percent, and dropout rates of 50 percent, which can impact project timelines for the firms. Apparao said that while the company has not lost projects, there could be delay in project commencement. For the company, stepping up freshers hiring is a long term strategy to address the talent gaps.

In 2020, the company hired 14,000 freshers, and it looks to on-board 20,000-22,000 in 2021. HCL Tech is now looking to hire 30,000 freshers this fiscal, who will be on-boarded next year. Wipro and Infosys too are stepping up their fresher talent supply to keep up with the demand.

Saurabh Govil, Chief human resources officer, Wipro said the company would give offer letters to a record 30,000 freshers this year, as it seeks to address attrition that stood at 15 percent for the last quarter.

Satish Jeyaraman, CEO, Diamondpick, a talent advisory firm, said fresher hiring was a great workforce strategy. “This is because when you hire more at the bottom of the pyramid, train them, deploy them in meaningful engagements, they assimilate well and become quickly productive,” he said.

Jeyaraman explained that companies that hire a lot of freshers, invest in training them and ensure that they are culturally aligned, tend to retain them longer, at least when compared to laterals.

This is what most companies aim to accomplish as they step up their hiring. A case in point is TCS. The IT major that employs 5 lakh people has a huge focus on nurturing talent in-house. During the earnings call in April, Rajesh Gopinathan, CEO, TCS said that the company was not worried about the war for talent as it believes in nurturing talent in-house. The company also has recorded one of the lowest attrition rates compared to its peers at 8.6 percent as opposed to 15 percent for Wipro, 13.9 percent for Infosys and 11.8 percent for HCL Tech.

Even mid-tier firms such as KPIT Technologies and Happiest Minds are looking to add more freshers as a long-term strategy to address rising attrition, compensation and other incentives.

In a recent interaction with Moneycontrol, Venkatraman Narayanan, managing director and chief financial officer, Happiest Minds, said that while the company had been hiring freshers for the last 2-3 years, it has been on the lower side, but it would step up recruiting fresh talent this year.

No change in fresher salary

Despite the increased demand for freshers, in most cases, their salaries have not risen much, and remain in the range of about Rs 3.5 lakh on average.

Apparao said this was a function of demand and supply.

Every year there are 10-15 lakh engineers graduating every year and there is more than enough supply of freshers. In addition, over the last few years Samuel Raja, placement officer, Vellore Institute of Technology, who was quoted earlier, said that companies began offering multiple packages to students. For instance, those students recruited for digital skills will get a higher salary package compared to the rest.

But the basic salary that IT companies offer have more or less remained stagnant and this is unlikely to change given that it is a question of supply and demand, according to industry executives.