IT hirings may drop by 20% in FY-09

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HYDERABAD: It is no longer left to conjecture. The recruitment projections being made by leading Indian IT companies clearly show a 10-20 per cent drop in the number of people likely to be hired by the industry in the current fiscal year (FY) compared to the previous year.

The $64-billion Indian software and services industry added around 200,000 people in 2007-08 financial year, as per industry estimates.

“There seems to be a reduction in the number of people being recruited and instances of companies phasing hiring and the joining dates of new recruits. But you will not see a ban on hiring or a drastic reduction in new recruits this year,” said Ganesh Natarajan, chairman of NASSCOM.

This is happening as Indian IT companies are not only grappling with the uncertainty of US recession, but also the urgent need to improve their revenue per employee to remain profitable in the face of challenges like talent crunch, rising salaries and appreciation of rupee against dollar.

Sample this: India’s largest IT software and services employer Tata Consultancy Services, which recruited 35,672 people in 2007-08, may see as low as 30,000 new additions in the current financial year.

While the company spokesperson says,”We do not see any slowdown in hiring momentum”, the numbers show otherwise.

Similarly, Satyam Computer Services Ltd is planning to hire 12,000-15 ,000 people in FY 2009, down from 16,000 the company hired last year. And most of those hired from campuses are not likely to come on board until October this year.

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“In the next couple of quarters, we want to make sure America is healthy for us. After that, we might revise the figure to around 17,000,” said SV Krishnan , human resources (HR) head of Satyam. Around 51-53 per cent of the company’s revenues come from the US. Just like most of its fellow Indian IT companies.

Meanwhile, Satyam is looking at utilising its people better and getting more and more productivity from its existing employees, according to him.

Though Wipro and Infosys did not respond to the question, most Indian IT companies seem to have adopted a similar ‘wait and watch’ policy until clouds of uncertainty on the impact of subprime crisis and US recession clear out, according to analysts and HR consultancies.

Efforts to increase productivity per employee is also likely to put pressure on new hiring. “Unless Indian IT companies, especially those in the tier I category, improve their revenue per head by 15-20 per cent in the next 12 months, they will not be sustainable. So, reduction in the number of new hires is actually good news,” said Partha Iyengar, analyst and India-head of resarch of Gartner.

As Indian companies move up the value-chain to higher-end domain led development , they have to break the linear dependence on headcount for revenue growth, he said.

Even a back of the envelope calculation shows, that the revenue per head of multinational companies like IBM and Accenture is around three times higher than that of Indian companies. But the good news is that there is no slackening up on the demand side or any drastic cutting down of projects, according to Iyengar.

After the initial turbulence in recruitment during the first quarter, it will be made up in second and third quarter of this fiscal, he said.

At the most, the sales cycle will become longer and what would have earlier taken two months to close may take four months in the current scenario, he added.