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After the sombreness in the past couple of years, hiring in the technology sector is expected to pick up in 2011-12 and surpass that in 2007-08, when recruitment in the sector was at its peak with bullishness in demand.
With an uptick in demand, the IT industry is expected to hire over 400,000 people this financial year, compared to about 350,000 in 2007-08. This could be the highest employee addition ever by the country's IT sector.
However, unlike in previous years, laterals (people with experience) are likely to be more sought-after recruits than freshers. This is because most companies exhausted their bench (reserve employees) during the global economic slowdown, as they did very little campus hiring due to uncertainty about the demand environment. With the industry registering better-than-expected growth in the last three quarters and pipeline of deals looking healthy, most companies don't want to spend on the lead time required for converting freshers into billable employees.
"Clearly, as companies are coming out of the downturn, they are hiring more experienced people than freshers. This is because they want to increase their bench, which they had cut down significantly during the downturn. Besides, IT companies are also trying to have a better predictability of their margins by hiring experienced people. Campus hiring leads to a drop in their utilisation rates," said Everest Research Vice-President (Global Sourcing) Amneet Singh.
Kris Lakshmikanth, CEO of HR advisory and consulting firm Headhunters, agrees: "We have seen a sudden spike in the hiring of laterals by most Indian and multinational IT companies. However, I expect the demand of laterals to come down once they (companies) meet the objective of filling the bench to a desired level."
The demand for laterals is being driven by a number of factors. Besides the need to augment their bench strength, Indian IT companies are also trying to move up the value chain, in line with the evolving nature of the technology industry. Services like enterprise solutions require skilled talents, which is aplenty in the market, owing to the churn happening at most Indian IT companies. Besides, the industry wants more domain experts to help them impress the clients and bill them higher.
"I think hiring will become more specialised, as the companies are looking at deriving more value by recruiting specialised people. The Indian IT industry has moved up the value chain in the last few years and an ecosystem is being created for specialists. With this, I expect 50 per cent of the hiring happening in the technology space globally to be in India, which offers such skills and talents better than any other country," said T V Mohandas Pai, board member and director of HR and administration at Infosys.
Traditionally, the fresher to lateral hiring ratio has been 85:15 at most IT companies. However, in January last year, the lateral hiring soared to as much as 40 per cent of the total hiring, with companies wanting to hire people who could be immediately deployed at projects without training.
In some large companies, the proportion of laterals in total new recruits is expected to be even more. For example, TCS, India's largest IT services exporter, wants to meet almost half of its overall hiring target of 37,000 for 2011-12 by hiring laterals. TCS has traditionally kept the fresher-lateral ratio at 60:40. In 2010-11, the company had a hiring ratio of 54:46, representing laterals and freshers respectively.
"In the current quarter (third quarter of 2010-11), we hired more laterals than trainees because of the demand that we saw coming. For the next financial year, we would like to keep the mix at 50:50. But it also depends on the business environment," said TCS Vice-President and Head (Global Human Resources) Ajoy Mukherjee.
Before the global downturn started daunting the industry, the overall hiring was at its peak in 2007-08, when the industry was estimated to have hired around 350,000 people - most of them campus recruits. While the fresher hiring took a hit in the last three years, in the current year, most companies are expected to hire freshers in large volumes from select engineering colleges. The number of campuses they visit this year has come down significantly, as companies have realised that "hiring from little known engineering colleges, as happened in 2007", has affected the quality of workforce.
For example, TCS visited only 171 engineering colleges this year, which is much less than in the past. Mid-sized IT services firm MphasiS has narrowed down the number of engineering colleges it visited this year to 45, from almost 150 three years ago. Infosys, which made 20,000 campus offers this year visited just 200 colleges, which is almost a third of the number of campuses it had visited three years ago.
"We are restricting ourselves to colleges where we can get quality and reasonable number of people. The quality in many of the colleges we used to visit earlier is very poor," said Infosys' Pai.
The decision is also driven by the clients who are now seeking quality manpower. MphasiS Chief Human Resources Officer Elango R said: "Currently, companies have been expecting more quick deals to happen. Clients are looking for more value and are focusing on niche areas. We are planning to hire more people, but will visit fewer colleges this year."
Even as IT continues to be the top career choice of most engineering students, the salary package being offered by most IT companies - Rs 1.5-3 lakh a year - remains at the level of 2007-08. In case of hiring experienced people with more than one skill (knowledge of computing language), companies are showing some flexibility and offering between Rs 6 lakh and Rs 8 lakh a year.
"With attrition worries continuing to haunt IT companies, we expect they may have to shell out a little more for lateral hires. However, the chances of raising the fresher package seems to be somewhat remote at the moment," said an HR consultant who did not wish to be named.