Indian IT sector has seen robust head count addition in the recently concluded September quarter, making it the best in three years.
A scan of recent quarterly reports, show top five IT firms have hired 35, 200 employees on a net basis in the July-September quarter, up from 14,300 employees in the same quarter last year. The previous best was September 2011 quarter, when these firms added over 40,000 people.
The strong hiring trend comes amid reports that $118-billion domestic IT industry hiring will slow due to automation and change in business models. According to report by research firm Crisil, incremental recruitment by the IT services industry will halve to 55,000 in fiscal 2018 from 105,000 in fiscal 2014, despite a 13-15 per cent revenue growth forecast for this period. It also pointed out reduction in employee costs from 69 per cent of total costs in fiscal 2013 to 64 per cent in the last fiscal.
In the July-September quarter, Cognizant lead the pack accouting for a third of the hiring. The firm added 12,300 employees, which is the best in its history. Tata Consultancy Services saw net head count addition of 8,326. Infosys (4,127 employees), Wipro (6,845 employees) and HCL (3,831 employees) also saw healthy net additions.
“The skills that we need shift a little bit. So we want to make sure that we do not have any skills mismatch. So, we scarified a little bit of utilisation so that we have the right skills for the changing demand and position ourselves well so that we do not have revenue leakage as we go into next year,” Cognizant President Gordon Coburn said in the recent earnings call.
According to foreign brokerage firm J.P. Morgan top six companies (including Tech Mahindra) collectively hired more employees 38,009 on a net basis, in the September 2014 quarter, than in any quarter over the past three years.
“For us it the most striking statistic of September 2014 quarter,” analysts Viju K. George and Amit Sharma wrote in a research note.
“This has partly to do with utilization peaking in the sector (except Tech Mahindra & Wipro). It also has to do with catch-up from fresher commitments made at the campuses some time ago. Nevertheless, adjusting for these two factors, we find employee addition in the sector heartening. Lateral hiring is still over 50 per cent of total hiring on aggregate,” the report said.
“Strong hiring numbers across the industry indicate confidence on pipeline and current assessment of growth opportunities. We do recognize that part of the hiring would be to build bench and provide cushion against increasing attrition rates. Nonetheless, the magnitude of increase in hiring numbers is a significant positive,” according to Kotak Institutional Equities.
“Admittedly, employee growth is not a perfect indicator of demand strength but there cannot be fulfilment of strong demand (if it exists) without employee addition. Not everything can be automated to obviate employee hiring and where automation is doable, there are limits to how much automation companies can single-mindedly pursue without sacrificing revenue growth,” J.P. Morgan noted.
