Indian IT: People problem? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Indian IT: People problem?

Apr 5, 2007

The recruitment bandwagon in the IT industry continues. With the top five (TCS, Infosys, Wipro, Satyam, HCL Tech) estimating an average topline growth of 40% in FY07 and average manpower growth of 28% in the same period, their ambitions on the hiring front have shown no signs of abating. In this article we take a look into the possible concerns, which the IT industry faces in terms of managing its human resource. Human Resources The present situation IT and ITES sector have hired 380,000 people during FY07 as demand for technology talent gained further momentum. The IT sector took on board 180,000 people and ITES 200,000 on a gross basis in 2006-07. The country's top four software exporters TCS (35,000), Infosys (30,000), Wipro (28,000) and Satyam (20,000) accounted for 1,13,000 new hires during the 12-month period (Source: NASSCOM). Average salary growth seen during the year was in the range of 12% to 15%.

A positive aspect in this rampant hiring drive by the billion dollar giants has been that the attrition rate has either stabilised or decreased for these companies. Both TCS and Wipro have reported lower attrition levels in 3QFY07 at 10.8% and 16.1%, respectively while Infosys' attrition rate increased from 12.9% to 13.5% during the same period. Although the company has maintained that most resignations were due to involuntary reasons (not being able to pass the company's training programme).

However, the key concern for the industry is that it is finding it tougher to hire quality talent because of inadequate supply (of quality graduates) and there is an increasing need for training. As a matter of fact, the industry will be hiring about 40,000 50,000 science graduates during FY08 and train them in software engineering. This is primarily because the education is not based on what was needed by the industry coupled with poor software and communications skills. The industry is also encountering problems and has put in place systems to catch corrupt elements that seek to gain entry into the IT sector using fake certificates. Although we believe that there will not be a great shortage of people in the future, there will definitely be a greater need for training. Raw and inexperienced talent is available in plenty but they need to be trained. We could definitely see wage inflation in the range of 18% - 20% in the coming year.

Indian IT firms spend around 40% to 45% of their revenue on employees, which is one of the most important factors affecting their operating margin. Adding further to the demand and supply gap, high attrition rate and increasing presence of global firms like IBM, Accenture, Hewlett Packard in the domestic market are some of the factors that impact a company's 'human' cost

Equitymaster requests your view! Post a comment on "Indian IT: People problem?". Click here!

  

More Views on News

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

This Indian Company is Tapping into the Huge Autonomous Driving Opportunity (Views On News)

Sep 14, 2021

Despite many challenges, Indian companies and startups have not shied away from entering this space.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE IT


Dec 6, 2021 (Close)

S&P BSE IT 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS