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Hiring activity slowing among IT firms

FY2014 may be looking a brighter growth year than FY2013 for IT firms, but hiring activity especially among freshers/trainees, doesn't seem to be in sync with it.

April 24, 2013 / 05:06 PM IST
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Moneycontrol Bureau

FY2014 may be looking a brighter growth year than FY2013 for IT firms,  but hiring activity especially among freshers/trainees, doesn't seem to be in sync with it.

Several top companies like Infosys, Wipro and HCL Tech who gave offers to engineering students last year have deferred joining dates.

A trend among IT firms was to hire en-masse from engineering colleges and then send offer letters to the selected candidates depending on the work load. But now candidates who have already been selected have had to wait for six months to a year to get their joining dates.

India's top software services exporter Tata Consultancy Services recently said it is confident of beating NASSCOM's FY14 growth guidance of 12-14 percent and will hire 45,000 employees on a gross basis. But this is lower than the over 50,000 employees it had guided to hire in FY13 and 70,000 gross employees it added in FY12.

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According to Ambit Capital, which surveyed 30 tier-II engineering colleges, a primary scouting place for IT firms, there has been a slowdown in campus recruitments.

"Our survey results confirm that campus hiring has declined significantly during the 2012-13 placement season. Some of the colleges surveyed have seen a 50-70 percent decline in the number of offers as well as a decline in the number of companies visiting their campus," said analysts Ankur Rudra and Nitin Jain in a recent report. 

Automation is certainly one reason for the decline in hiring. More and more systems and processes are now being automated and that means lesser number of software developers and testers are needed.

But more importantly its the slowdown in client spending and the overall global demand uncertainties that have plagued the sector in the last couple of years, that has turned companies cautious in expanding their work force. Companies earlier used to maintain a huge bench strength (idle employees). But with the slowdown in spending and pressure on margins, organisations have become much leaner.

There are also company specific issues. India's second largest software services exporter Infosys, for instance has lagged the industry growth for several quarters now. It deferred salary hikes and increments last year to October. On-site employees, in fact got their increment only in Jan this year. It had also deferred hiring last year.

Infosys pushed its employee utilisation levels to around 69 percent in fourth quarter. But that is still at a low level. According to Morgan Stanley Research, the company has idle capacity of 43,000 employees.

In a post earnings conference call, Infosys CEO SD Shibulal told analysts the company will honour all the offers it has already made.

Some analysts also point out that since the sector has reached a scale, lot of hiring now also happens from within the IT industry, which could be one more reason for slowdown in hiring from colleges and other sectors.

In a recent conference call, India's third largest IT company Wipro told analysts it has absorbed all its freshers hired from campuses last fiscal and they have gone on campus to hire for this fiscal too. Its hiring, however, will be based on demand and one-third of its hiring is now from laterals.

Nachiket Kelkar

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