IT sector hiring could hit decade high in FY22, lead to margin pressure
In 2011-12, the net hiring by top five offshore IT companies stood at 1,11,022, which has not been exceeded in the following nine years.
By Chiranjivi Chakraborty, ETMarkets.com |
Agencies
MUMBAI: Indian IT companies' net hiring in FY22 could hit the highest number of workers in a financial year since the heydays of 2011-12, brokerage firm JM Financial said in a note released on Monday.
Acceleration in the adoption of digital services by global companies led to a slew of deal wins and an increase in demand for IT services across the world, making 2020-21 a transformative year for Indian IT companies.
“This is fuelling improvement in revenue growth for the sector and also the shift towards higher offshoring. We believe that the net hiring in FY22 by the industry could possibly be the highest ever in several years,” the brokerage firm said.
In 2011-12, the net hiring by top five offshore IT companies, such as Infosys, Cognizant, Wipro, HCL Technologies and Tata Consultancy Services, stood at 1,11,022, which has not been exceeded in the following nine years.
Largecap IT companies have already stepped up hiring, as reflected in the December quarter, in which net hiring was higher than the cumulative figures between April and December. Top executives at IT companies have already said that a talent war is coming with an enhanced need to service clients’ demands pushing companies to acquire talent at expensive salaries.
Companies are also taking steps to retain talent by offering special bonuses such as one offered by HCL Technologies recently. Analysts said that some large IT companies have also indicated that a normal wage hike cycle will resume from the next financial year, and others will follow suit soon.
“There is a war for talent and one of the things Infosys is always been good at over the years is the basic training,” Infosys chief executive officer Salil P Parekh had said at the Kotak Chasing Growth conference recently.
However, this also has implications for the margins of Indian technology services companies as enhanced wage hikes and special bonuses could eat into profitability. JM Financial believes that large-cap tech companies are well-equipped but the industry at large will start facing supply-side headwinds in terms of talent in the second half of the next financial year.
“From a margin perspective, my own sense is growth in the overall company will help an overall growth for employees and will have a positive outlook on margins,” Parekh had said.
JM Financial for the time being is sticking with its top large-cap bets of Infosys and HCL Technologies, and mid-cap IT picks of Persistent Systems, Mphasis and Coforge.
Acceleration in the adoption of digital services by global companies led to a slew of deal wins and an increase in demand for IT services across the world, making 2020-21 a transformative year for Indian IT companies.
“This is fuelling improvement in revenue growth for the sector and also the shift towards higher offshoring. We believe that the net hiring in FY22 by the industry could possibly be the highest ever in several years,” the brokerage firm said.
In 2011-12, the net hiring by top five offshore IT companies, such as Infosys, Cognizant, Wipro, HCL Technologies and Tata Consultancy Services, stood at 1,11,022, which has not been exceeded in the following nine years.
Largecap IT companies have already stepped up hiring, as reflected in the December quarter, in which net hiring was higher than the cumulative figures between April and December. Top executives at IT companies have already said that a talent war is coming with an enhanced need to service clients’ demands pushing companies to acquire talent at expensive salaries.
Companies are also taking steps to retain talent by offering special bonuses such as one offered by HCL Technologies recently. Analysts said that some large IT companies have also indicated that a normal wage hike cycle will resume from the next financial year, and others will follow suit soon.
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“There is a war for talent and one of the things Infosys is always been good at over the years is the basic training,” Infosys chief executive officer Salil P Parekh had said at the Kotak Chasing Growth conference recently.
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However, this also has implications for the margins of Indian technology services companies as enhanced wage hikes and special bonuses could eat into profitability. JM Financial believes that large-cap tech companies are well-equipped but the industry at large will start facing supply-side headwinds in terms of talent in the second half of the next financial year.
“From a margin perspective, my own sense is growth in the overall company will help an overall growth for employees and will have a positive outlook on margins,” Parekh had said.
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JM Financial for the time being is sticking with its top large-cap bets of Infosys and HCL Technologies, and mid-cap IT picks of Persistent Systems, Mphasis and Coforge.
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