http://www.nytimes.com/2013/03/26/busin ... rcers.html
Sea Change in Hiring for India Outsourcers
By HARICHANDAN ARAKALI and TONY MUNROE | REUTERS
Published: March 25, 2013
MUMBAI — Indian information technology outsourcers are relying more on experienced workers, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staffs.
The shift by Infosys and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, low-margin information technology and back-office services.
For young graduates who see the $108 billion I.T. industry as a sure pathway to modern India’s growing middle class, the transformation is unsettling.
Dozens of industry aspirants who were recruited by one of the smaller players, HCL Technologies, recently protested outside its offices in several cities. They were offered jobs in 2011, before graduating last year but have not yet been given start dates, much less paychecks.HCL’s profit and revenue rose in the fourth quarter of 2012, while staff numbers shrank
— a rare trick in an industry that has long aspired to break the linear relationship between head count and revenue growth.Just 20 percent of the 5,000 to 6,000 campus recruits offered jobs by HCL in 2011 have been actually hired since graduation last summer, and HCL said it had made no offers in 2012 to students who would graduate in June this year.
Slower growth, fewer people leaving, greater demand by customers for experienced staff and increased productivity through automation and software have put pressure on all recruits, according to HCL, although it said it expected to accelerate hiring of entry-level staff beginning next August.
“It’s not that the demand doesn’t exist; it exists for different skills,” said Ajay Davessar, an HCL spokesman. “Typical roles, which a student thinks, ‘I’ll just go there and start coding, and have a good life,’ are being tested to reality.”
Tech Mahindra, another outsourcing company, is naming 100 managers to be what it calls mini-C.E.O.’s, who will be given broad latitude to run their parts of the business.
“We’re moving towards a situation like the developed economies, where we’re asking the people to be more deep,” said Sujitha Karnad, who heads human resources at Tech Mahindra. “We want more solution architects to be here.”
While plenty of Indian back-office work — like technical support, processing insurance claims and staffing call centers — will remain labor-intensive, software service companies are looking to move up the value chain, which means raising the productivity of staff members.
Growth in revenue per employee across the industry could expand to 5 percent a year in the next two years from about 3 percent over the past five, said Frederic Giron, principal analyst at Forrester Research. The growth rate is likely to accelerate starting in 2015, as work based on intellectual property accounts for a growing share of the total, he said.
The information technology service industry developed in India in large part because of the availability of inexpensive skilled labor, an advantage that is eroding as wages and other costs rise in the country. In years past, it was cost-effective for I.T. companies to hire new graduates by the thousands and keep a portion idle, awaiting deployment on a client project.
But budget-constrained clients now demand shorter lead times. I.T. vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a consulting firm for staffing.
Traditionally, about 30 percent of Indian I.T. workers are idle, or “on the bench,” at any time, often in training, as they await deployment. In the quarter that ended in December, about 70 percent of Infosys staff members were deployed on billable projects; the figure was less than 65 percent at Wipro.
At Tata Consultancy Services, the largest Indian I.T. services company, the figure was 72 percent, within what Ajoyendra Mukherjee, its human resources leader, calls the comfort range of 70 to 74 percent utilization. “I think we can push it up to 75, 76,” he said.
Another I.T. services company, iGate, envisions having 10 percent of staff members on the bench, said Srinivas Kandula, its human resources chief, who predicts that the size of its bench will shrink two or three percentage points a year over the next five years.
Shorter benches will mean a smaller share of hiring is direct from campuses, as an experience worker moving from a competitor would be less willing to wait to be deployed, and companies would be reluctant to pay them to do so.
Companies are also binding hires, especially experienced ones, with three-month notice periods without buyout clauses, compared with one-month notice periods previously.
Among top-tier companies that are most actively trying to push growth where revenue is not constrained by the size of the work force, about 70 percent of employees are experienced staff, up from 60 percent in 2008, said Rajiv Srinivas, an associate director at Tech Mahindra. He expects that to rise to 90 percent in the next two or three years.
At Infosys, the net quarterly addition of employees fell from 4,906 in the March quarter last year to 977 in the December quarter (excluding an acquisition). But recruitment of experienced workers held steady at an average of about 4,300 per quarter through December, meaning the percentage of campus hires was much lower.
“Earlier, the focus was more on career: you get into a job, you start learning and slowly acquire knowledge over a period of time,” said Sunil Gupta, who joined Infosys as vice president of quality about six months ago from the Indian unit of Logica, which in turn is part of the Canadian I.T. service company CGI Group. “Today the value of a professional is judged by how quickly you’re learning, how quickly you’re adapting yourself and changing along with the environment.”