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As talent crunch hits India Inc., Indian IT majors go on a hiring spree hiring fresh talent off the campus. Beside, the rapid rate of growth in global IT spending, high attrition rates also contributed to this phenomenon.
Anyway, financial year 2006 has seen the largest amount of hirings by the big four of Indian IT in the past six years. The four IT giants, namely Infosys, Wipro, Satyam and TCS, together added close to 56,000 employees in the previous fiscal.
This has been the highest number of employee additions, and the numbers have multiplied by more than three times since March, '01. Clearly, the rapid rate of growth in global IT spending is behind the recent spurt in employment in the sector.
Employee numbers in these companies have been growing at an average of 42% since FY03. The number of trainees and fresh graduates in their portfolio has also increased dramatically.
In FY06, the ratio of freshers to lateral employees was roughly 70:30. In case of Infosys, there were more than 5,000 trainees as on March, '06, compared to just 903 during the same period last year.
The number of employees in these four IT majors increased to two lakh by the end of March, '06. Individually, while Infosys, TCS and Satyam witnessed their highest number of net employee additions in FY06, Wipro added a slightly lesser number of employees in FY06 compared to FY05.
What is noteworthy, however, is that last year nearly all of the employee additions in Wipro were in its IT services segment, while in previous years, more than 40% of the increase was in its BPO segment.
A natural outcome of such astounding growth in employment in the sector has been a high rate of churn within the industry. In Infosys, for instance, attrition rate has risen from 6.9% in March, '03, to 11.2% in March, '06.
TCS, too, has seen its attrition rates increase from 7.7%, a couple of years back, to nearly 10% in FY06. Experts, however, believe there is no reason to worry.
"A high attrition rate in the industry is an indication of good times as it shows that demand for employees is growing and more opportunities are being created," says Shekhar Singh, vice-president, ICICI Securities. The 1999-00 IT boom, for instance, was also accompanied by very high attrition rates.
Indian IT sector revenues have been growing by 30-32% in the past couple of years. With the global IT spending slated to increase further in the coming years as well, software majors expect an even bigger expansion in the employee base of FY07.
Increasing number of employees on the payroll has, however, meant a rise in employee costs, which, in some cases have doubled this year.
Analysts believe that in an environment of increasing salaries, a great deal would depend on the bargaining power of companies and whether they are well diversified in terms of clients, verticals and service offerings in order to improve margins.
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