IT cos opting for lateral hiring to optimise costs
Campus hiring this year is likely to reduce substantially unless demand environment improves
image for illustrative purpose
- Many cos over-hired freshers in anticipation of robust demand
- However, economic slowdown spooked their plans
- Current situation forced IT cos to devise new strategy to reduce costs
- Wage cost accounts for over 55% of total operating cost
Bengaluru: Indian IT services companies are likely to opt for more lateral hiring of experienced engineers as compared to fresh engineering graduates this year in their bid to adjust their manpower planning strategies to the current demand environment.
Industry veterans are of the opinion that deferment of joining dates of freshers from campuses, firing trainees for not clearing final steps before joining projects and reducing compensation from the original offer were last seen during the global financial crisis in 2008-09.
“As the revenue growth comes down for large IT companies, they are trying to readjust the cost. If you look at what happened during 2007-2009 period when global financial crisis hit the world, the reactions of all the IT companies were similar. They had deferred the joining dates, tried to reduce the wage cost. So, the same playbook is playing out now,” V Balakrishnan, Chairman, Exfinity Ventures & former CFO of Infosys told Bizz Buzz.
Sources in the know said that all companies- both large and mid-tier firms- have deferred joining dates of freshers who have been recruited from campuses last year. Companies like Wipro have now modified their offers for some engineering graduates selected from college campuses. The company has given freshers the option of taking up certain roles at Rs3.5 lakh per year, compared to its initial offer of Rs6.5 lakh per year.
Similarly, both Wipro and Infosys had fired fresh engineering trainees after those candidates were not able to clear its internal assessment tests.
Experts are of the view that many companies have over-hired freshers from campuses in anticipation of robust demand. However, economic slowdown has spooked their plans and they are forced to devise new strategy for optimising cost. As wage cost constitutes more than 55 per cent of their total operating cost, reducing headcount is the first option getting explored as of now.
“This year, probably, more lateral hiring will happen than fresher hiring from campuses. Companies are likely to depend on just in time hiring and play the game as the demand environment remains uncertain,” Balakrishnan said.
On an aggregate basis, top four Indian IT services companies- TCS, Infosys, Wipro & HCL Technologies, added 227,000 fresh engineering graduates in the last financial year. Hiring among mid-tier companies also remained robust during this period. However, management of most IT firms have started giving first indication of slow hiring plans from third quarter onwards. In the third quarter ended December, the top four IT firms- Tata Consultancy Services, Wipro, Infosys and HCL Tech reported a combined net addition of 1,940employees, a drop of 94 per cent from the previous quarter.
“Many freshers are already opting for jobs where the joining dates are nearer than waiting to join a big firm. Though most companies will continue to do campus hiring this year, the numbers will be nowhere near last year’s numbers,” said a HR professional whose firm has seen some improvement in hiring mandate for lateral hires after a dip in the third quarter.
