Software companies dramatically improved their ability last year to earn more revenue while employing fewer people, reflecting the major transformation underway in a sector that has created a new middle class in India.
While the development is good news for information technology companies, it is also a warning sign for employees in the software industry and for students looking to make a career in an industry that used to hire thousands of employees every year.
Between April 2013 and March 2014, the IT industry added only 13,000 employees for every billion dollar of revenue, according to data from software industry grouping Nasscom. During the year to March 2013, it needed 26,500 employees.
“We are moving up the value chain, getting more dollar for every hour of work. And more automation of existing work means we are hiring less and less to achieve the same growth,” said Achyuta Ghosh, head of research at Nasscom.
From about 4 lakh employees in 2000, the Indian IT industry has grown to 30 lakh professionals and become the career of choice for graduates in search of lucrative salaries and overseas posting.
While revenue has increased from $8 billion at the turn of the century to $118 billion (Rs 7 lakh crore) now, the pace of change in technology and processes has accelerated in the recent past.
Infosys and US-headquartered Cognizant have partnered with automation specialists such as IPSoft while Tata Consultancy Services (TCS) and HCL Technologies have built automation tools in-house.
Business process outsourcing firms are also increasingly moving to automate their back-end processes.
These companies are also focusing on higher value projects that call for specialized skills, where not only do the engineers need to understand their technology domain, but also the functional domain they are working in.
This focus on a highly skilled workforce clearly means fewer opportunities for the over 1 million graduating engineers every year.
“This has to happen because one way to mitigate the impact of a rise in manpower costs is to try and decrease the number of person hours used,” said Ganesh Natarajan, CEO of Zensar Technologies, which employs 6,800 professionals.
Among the top IT services providers, HCL Technologies is so far proving to be the most efficient when it comes to revenue productivity. In 2012-13, it employed 18,270 staff for every billion dollar in revenue.
Infosys required 21,202 employees, Wipro 23,480 and TCS 23,810 for every $1 billion in the top line.
Since the end of 2007, India’s largest standalone BPO, Genpact, has reduced the number of employees needed to earn $1 billion in revenue by over 10,000 to 29,577.
Vineet Nayar, a former CEO of HCL Technologies, observed that while the improvement in revenue productivity is not necessarily a good harbinger for the future, investments in incubating products and developing a pool of highly skilled workers will be critical for success.
“Indian IT is at a crossroad and has to rethink its core strategy to stay at the top of the value curve and not just the volume curve.” For employees, the shift does not come without its costs.
Engineering graduates are facing stagnating wages and fewer jobs as supply far outstrips demand as IT firms pick quality over quantity.This has resulted in choosy companies preferring to head to the cream of engineering colleges while recruiting talent.
“They will pay more and hire fewer, but they get top talent. More emphasis is placed now on software and technical skills,” said Alka Dhingra, regional manager at recruitment firm TeamLease. The change also affects how Indians view software coding.
For decades, becoming a software engineer was considered a sure ticket to a better life. Now graduates left on campus will need to upgrade their skills separately, and be willing to work on short-term projects to make themselves attractive to potential employers.
“They can’t wait for the company to come to them any more,” said Dhingra.
Source: Times of India