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IT industry: Hiring slows down - Views on News from Equitymaster

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IT industry: Hiring slows down
Dec 2, 2008

Given its nature, addition of new employees is a key indicator of growth for the Indian IT services industry. Hiring plans of IT companies indicate their confidence in market situation. And this confidence seems to have been shaken if the latest hiring trends are anything to go by. The numbers released at the end of September 2008 revealed that although IT companies are hiring additional people, the pace has considerably slowed down.

Hiring among the larger companies like TCS, Wipro, Satyam and HCL Technologies have declined by more than 40% YoY in the September quarter. Infosys was the only company that witnessed a higher employee addition during the said quarter.

No. of employees added (Net of attrition)

Company Quarter ended Sept.2007 Quarter ended Sept.2008 Change
TCS 9,268 5,328 -43%
Infosys 4,530 5,927 31%
Wipro 5,361 1,319 -75%
Satyam 3,037 1,814 -40%
HCL Technologies 3,625 1,973 -46%
Oracle Financial Services 1,968 1,186 -40%
Tech Mahindra 1,954 766 -61%
Mindtree 464 30 -94%
Mastek 651 163 -75%
Source: CMIE

Hiring by the small and mid-sized IT firms has also entered into a lull. Companies like Mindtree and Mastek registered 94% YoY and 75% YoY decline respectively in the new employee intake during the quarter ended September 2008.

Given the high dependence of the Indian IT industry on the US economy, companies are hesitant in increasing its employee strength taking a cautious route towards hiring. Furthermore, in wake of worsening economic scenario and shrinking job opportunities, attrition rate in IT industry has also come down significantly thereby reducing the need to hire a large number of new employees. The attrition rate at major IT firms like Infosys, Satyam and HCL tech has come down by 1.4% YoY, 1.6% YoY and 2.2% YoY respectively.

The slowdown in hiring also needs to be seen in context of the increase in utilisation levels across these companies. Broadly, the trend in hiring clearly reflects the adaptability of these IT companies to the changing global scenario. The Indian IT companies have followed a ‘linear growth’ model wherein to generate higher revenues, they needed to consistently hire people. But to survive and grow strongly and profitably in the future, these companies would have to improve their productivity levels by generating a greater share of revenues from high end businesses such as software products. The current crisis might well speed up this process of change.

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