A massive talent crunch in the information technology (IT) industry is expected to peak in the next quarter before beginning to plateau and taper, says Venkatraman Narayanan, Managing Director and Chief Financial Officer of Happiest Minds Technologies.
Narayanan spoke against the backdrop of increased attrition in Happiest Minds and the IT industry as a whole.
“I see the attrition problem picking up for maybe a quarter, and then it will plateau. And then like everything else, dip,” Narayanan said in an episode of Life After Listing, a Moneycontrol series that focuses on the key changes for a company's management and founders/promoters after their company goes public.
Happiest Minds reported high attrition rates in the last financial year and the level has risen steadily. From 12.1 percent in FY21, it jumped to 17.8 percent in Q2 of FY22, 21.1 percent in Q3, and 22.7 percent in Q4.
In fact, the whole IT industry saw attrition jumping in FY22 as startups snapped up tech talent, offering inflated salaries which induced employees to job-shop more aggressively.
Sudden shift to digital
Narayanan believes the rapid growth in demand for tech talent is on account of a sudden move in the IT industry towards digital technologies.
“You have the traditional IT and the digital IT. Everybody is moving to digital IT. This whole transition of moving to digital will require a lot more supply, investments, and capabilities. So, there is a market of demand,” he added.
With the IT industry growing at 11-14 percent a year, the sector’s revenue is projected to reach $350 billion by FY2026, according to a recent report by the National Association of Software and Service Companies (NASSCOM).
“Give or take another two years, it’s still rapid growth,” said Narayanan.
Happiest Minds reported a 44.5 percent rise in net income to Rs 52 crore in the March quarter, on a 39 percent increase in revenue. The company generates revenues from three business units -- digital business services, product engineering services, and infrastructure management and security services.
“The challenge here and now is the talent crunch. You see it because of this sudden (shift to digital) cutover. Whenever there is such a transition, which is so rapid, especially when it got accelerated because of COVID, you run into trouble,” added Narayanan.
Changes in hiring patterns and job trends
Narayanan believes that owing to a generational shift of mindset towards employment and changing dynamics between talent and recruiters, hiring has now become a collaborative exercise.
“We have to change our hiring patterns, our hiring practices according to the needs of the day, and which is what I think our teams are doing today,” he said.
For example, Narayanan said while the company needs digitally capable people, they don’t necessarily have to be engineers as long as they are trained by a finishing school in new digital capabilities.
“If there are people with both attitude and aptitude, maybe a person who's a pure science graduate, they can get trained, ” he added.
Happiest Minds added a net 940 employees, and 2,930 on a gross basis in FY22, taking its headcount to 4,168. It net-added only 147 in Q4 against plans to hire 300 fresh faces in each quarter.
“Talent will get backfilled, but it will take time. I would say (for) one or two years, you will have this talent crunch,” Narayanan said.
In September 2020, Happiest Minds raised Rs 702 crore via an initial share sale. The IT solution services provider debuted on the bourses at a bumper premium of 111.4 percent over its IPO price.
Interestingly, the company clocked the biggest listing premium in a decade and the third biggest in the last two decades.
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