IT sector to create 13% less jobs in FY16, says Nasscom; companies like Infosys, Capgemini, others to hire fewer people

MUMBAI: The pace of hiring in the information technology industry, one of India's largest job creators, is set to slow in the coming years. Industry body Nasscom estimates the sector to create 30,000, or 13%, less jobs in fiscal 2016 compared with this year, as new technologies make many roles redundant and companies improve efficiency as clients demand more bang for the buck. And, this is expected to be the beginning of a trend.

"The industry is taking steps to decouple revenue from headcount growth with more automation and platform-based revenue growth," R Chandrasekaran, chairman of Nasscom and executive vice chairman of Cognizant India, said at the Nasscom India Leadership Forum earlier this month. "We will continue to be a net hirer, but the pace of hiring would change."

India's IT outsourcing companies traditionally billed clients on the basis of staff working on their projects, linking revenue directly to headcount. That is changing with the industry increasingly adopting automation to do repetitive and low-level jobs. The new focus is on niche areas such as artificial intelligence and cloud, and people with skills in these domains are in high demand. Others, especially fresh graduates, may find it tougher to find job.
Nasscom is predicting net job additions - which exclude replacements - of about 2 lakh in the fiscal 2016 that starts this April. Even its best-case-scenario estimate doesn't exceed this year's 2.3 lakh hirings.

While hiring had slowed between fiscal 2011 and 2014, before they picked up in fiscal 2015, experts say that was the period when the industry was grappling with the fallout of the global recession and heavy bench strength - an industry term for employees who aren't working on client projects. Now growth is picking up and the bench barely exists, but the industry is hiring fewer staff.

"Hiring will definitely be slower than revenue growth. Not just because of automation but also because IT companies are trying to make their existing employees more productive. The slow pace will affect the middle management as well lower rung of employees doing work that can be automated," said Ambit Capital analyst Sagar Rastogi. "Going forward, the pyramid will become much steeper. If you had one person managing 10 servers, technology makes it possible for him to handle 50 or 100 servers. He is more productive and you won't need that many people."

Headhunters Shift Focus

Recruiters have started adjusting their business models to the changes in the industry. "India is no more a destination of low-cost jobs and tech-enabled work will not lead to same pace of hiring. We will start focussing on product companies more than IT service firms," said Shiv Agrawal, managing director and chief executive of ABC Consultants. Around 10% of the recruitment firm's revenue comes from the IT sector.

Magna Infotech, a recruitment firm that looks at IT hiring, expects the change to force it to look at more candidates with niche skills. "In absolute numbers IT recruitment will go down by 5-10%, but as our search becoming tougher, we will get 10-15% higher value per candidate," said CEO Anurag Gupta.

With automation, the traditional pyramid may not look the same and the base will definitely become narrower, said Capgemini India CEO Aruna Jayanthi. Clients of the IT firm have asked for 30-40% productivity improvements in contracts, she said.

In a pyramid structured company, the senior management is at the top, followed by the middle order and then the base comprising the rest. "We do not see a new team being set up whenever a new project comes in. With AI (artificial intelligence) and cloud, delivery models are changing and evolving; hence there will be only incremental growth in hiring for middle management and below in IT services," said Navnit Singh, chairman and regional managing director India at executive search firm KornFerry International. Singh added that since India has established its credentials as the back-office delivery centre, hiring will primarily be in client interface roles like marketing.

The need to move up the skill sets will also lead to a change in the hiring mix and companies will concentrate more on those with experience than a workforce straight out of campus. Capgemini, for example, employs 56,000 in India and plans to ramp up the headcount to 70,000 by end-2016, but will focus on those with experience. "About 30-40% of the hiring will still come from campuses but the rest will be lateral hires," Jayanthi added. In the past, campus hiring accounted for a little over 50%.

According to reports, Infosys plans to hire 30,000 students from campuses, which is its lowest in three years. Wipro refused to comment on its plans.