Indian IT job aspirants will have fewer opportunities going forward as employers scramble to keep their profits rising while their clients are forced to rationalise costs amid global economic slowdown, said CRISIL rating agency, the India unit of Standard & Poor's.
The incremental recruitment by the information technology services industry will halve by fiscal 2018 despite a 13-15% growth forecast in the industry's revenues during this period, CRISIL said on 10 November.
The IT sector had accounted for nearly a quarter of the organised private sector employment in India in the fiscal year ended on 31 March 2014. With revenues of $118bn in the last fiscal, the sector employs 3.1 million people, or around 24% of organised private-sector employment in India.
"For future job aspirants, this will mean fewer opportunities and adding to skill sets Changing business models of vendors will lead to cherry-picking and more lateral hirings," CRISIL said.
This contrasts with the hiring pattern of the last decade, which had mirrored revenue growth in the industry.
"The paradigm shift will come as IT services vendors struggle to crank up profitability in a milieu where global weakness is forcing their clients to optimise costs to hold on to margins. On their part, vendors responded by rationalising their bench strength, improving utilisation rate and trimming operational costs."
Job additions will gradually shrink by about 50% to 55,000 by fiscal 2018 from 105,000 in fiscal 2014, CRISIL said.
Delinking Revenue Growth From Hiring
India's IT service vendors are gradually adopting just-in-time hiring and increasing the proportion of fixed-price contracts in their portfolio, which reduces the need to maintain flab on the bench, CRISIL said.
Additionally, they are migrating towards higher-value service offerings such as consulting, investing in intellectual property-based products and leveraging on the emergence of social media, mobile, analytics and cloud.
"These initiatives will increase revenue per employee at a compounded annual growth rate of 7% between fiscals 2015 and 2018," said Ramraj Pai, CRISIL Ratings Business Head.
"This, along with improvement in employee utilisation, will over time delink hiring from revenue growth. We also foresee a transformation in the recruitment pattern where employers become more focused and picky, increasingly seeking specific skill sets. This will lead to greater lateral hiring," said Pai.
India's IT sector has practically driven growth in organised private jobs in the country over the past decade. Its initial phase of high revenue growth between fiscals 2003 and 2007 also saw a substantial growth in recruitments.
Companies have already begun opting for more-focused, higher-value initiatives, CRISIL said.
"This process has already been set in motion, as evidenced in the reduction in employee costs from 69% of total costs in fiscal 2013 to 64% in the last fiscal, said Anuj Sethi, a director at the rating agency.
World's largest IT service providers like Tata Consultancy Services (TCS), Cognizant, Infosys, Wipro - all have their work stations majorly concentrated in India.