• OUTLOOK ARENA
  • VIEWS ON NEWS
  • JUNE 27, 2011

New hiring strategy by Indian software firms

Indian software companies seem to be on an altogether different path as far as their hiring is concerned. Earlier they used to maximize offshoring to boost their profits. But if you look at the recent data of overseas hiring done by these companies, it will tell you a completely different story.

Tata Consultancy Services Limited (TCS), India's largest software company by sales, recruited nearly 1,150 people in the US in the last fiscal year. The buck doesn't stop here. The management of the company plans to hire more than 1,200 Americans in the current financial year. And it is not just TCS which is hiring there. Infosys, India's second largest software company, plans to hire as many as 1,500 workers in the US. Other India-based software firms such as Wipro and Cognizant are also joining the race to hire fresh engineering graduates from the different universities of the US.

Is all this hiring just to negate the anti-outsourcing sentiments in the US? Not really. North America is not the only place, where these companies have plans to hire. In other part of the world such as in China, Infosys plans to triple the number of its employees to 10,000 in three years. TCS also plans to add more than 900 employees in China. All this shows that they are ramping up their hiring outside India.

There are many reasons behind this change in the hiring strategy. The stricter and costlier visa permits in the US is one of the main reasons. But there is more to it.

As their business expands in terms of global footprints, these companies are increasingly looking at optimizing their employee mix. As a result, these companies are trying to diversify their talent pool by creating an optimum and healthy mix of nationalities, experience levels etc. The idea is that this will help these companies deliver the services to the overseas clients in a better way.

By ramping up the hiring outside India they want to address many existing project delivery related problems. For example, while dealing with the local businesses in China, an Indian company may typically face issues related to language barriers and cultural differences. These problems can be sorted out by hiring Chinese locals.

Indian software firms are planning to invest more in different part of the world. For example, Infosys plans to invest US$ 135 m in Shanghai in the next few years to build a new office capable of housing more than 7,000 employees. TCS aims to double its foreign workforce from 10,000 currently to 20,000 over the next five years. If all these steps continue, these software companies will have different employee mix after 3-5 years. Share of non- Indian employees in the mix may go up to 10-15% from the present 5% level.

We believe that this change in hiring strategy will help Indian IT companies deliver the overseas projects in a better way. In the light of rising anti-outsourcing sentiments, it will also project a better image of these firms.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407