Hiring people today in the IT sector is more about finding talent with the right skillsets as artificial intelligence (AI) and related technology developments take off. There will be more focus on outcome based hiring, R Shankar Raman, CFO, Larsen & Toubro Group told Moneycontrol.
This comes a few weeks after HCLTech CEO and MD Vijayakumar too highlighted while there is an industry-wide slowdown at present, IT sector will eventually continue hiring with a changed view on training and skill sets needed. The companies would need to reimagine training modules of freshers as well.
Raman said, “IT staffing is no more a question of how much compensation needs to be paid, we need to have the people with the right skillsets. As world is transitioning towards AI and the related developments, we need to reskill our people. People who wrote the normal Cobalt code may not be useful today, because of the evolution of low code no code.”
He added, “The investment that we need to make in talent, which will enable the industry to help clients move to the next 5-10 years of profitably…in terms of augmenting right resources. We need to balance the resource pyramid. We will also need lower band of employees, who can cost less and do the grunt work.”
“This transition between mass hiring for time and material to outcome based is the inflection point for the industry,” he said
L&T’s IT and engineering services business
L&T Group has a dedicated engineering and technology services company, LTTS and an IT services arm LTIMindtree.
According to Raman, the IT services customers and engineering technology customers are “very different species”. While the technology clients are proceeding with their programmes which improves the functionality of their end products and processes, IT services’ customers are more cautious and reassessing their tech spends in the current challenging macroeconomic environment.
“I do think LTTS which is more into the embedded engineering side is in a little better place comparatively in terms of facing the next six to 12 months, as compared to commercial IT. Commercial IT has fair bit of discretionary spend. A lot of money was spent to migrate data from on-premise servers to cloud,” he said.
Raman added, “We did benefit from that move and backed fair bit of orders as businesses particularly post pandemic, started resorting to more internet based transactions. That pace will start to slow down a bit now because people would possibly like to reassess how spends they have made in these areas will pay out.”
He explained that given the slowdown in IT spends by customers, the competition has increased among the services companies. The customers will be taking advantage of the situation opting for projects which are more and more based on outcomes.
“In terms of hiring employees too, it is not going to be for time and material spend, it will also be a part of the compensation coming out of the outcome we achieve. If there is a productivity improvement in an IT project we are doing, we have to establish productivity and share the upside with the customer. This is a trend globally and all IT companies have to reposition their models and we are doing that as well. So in a way you can call it investment-led IT growth,” Raman said.
Interesting, as of the second quarter ended September 30, LTTS had cut its revenue growth guidance for the full year of FY24 to 17.5-18.5% in constant currency terms, as compared to over 20 percent estimated earlier.
As of Q2, LTTS’ revenue was up 3.69 percent QoQ to Rs 2,386.5 crore, while net profit went up by 1.21 percent QoQ at Rs 315.9 crore. The company’s operating margin was down 11 bps to 17.07 percent.
LTIMintree’s net profit for Q2FY24, had plunged by 0.87 percent QoQ to Rs. 1,162 crore. Consolidated revenue was up by 2.43 percent QoQ to Rs 9048.6 crores. Operating margin declined 70 bps QoQ to 16 percent.
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