Pick-up in hiring signals worst may be over for Indian IT firms
The top five software services providers operating in India added 24,047 people in the fiscal first quarter, compared with the 13,772 net additions in the previous financial year, leading many experts to believe that the industry is set to record the fastest growth in three years.
The turnaround in the pace of hiring at Tata Consultancy Services Ltd (TCS), Cognizant Technology Solutions Corp., Infosys Ltd, Wipro Ltd and HCL Technologies Ltd in the June quarter follows a year of tepid employee additions, the slowest pace since the offshore outsourcing boom started at the turn of the century.
Analysts attribute the reversal of fortunes for the sector to three reasons. First, companies are looking to spend more on outsourcing technology work. Second, Fortune 1000 companies are using data analytics platforms offered by IT vendors to run their business better. This, in turn, is translating into more work for the outsourcing companies, for now. And third, companies are increasing their spending on digital technologies. The increased spending has led to more contracts that are valued at over $1 billion.
For instance, Mumbai-based TCS has won three mega deals since December last year, bringing in a combined $5.6 billion in revenue. Last week, Bengalurubased Wipro Ltd won its largest contract valued at $1.6 billion.
“The early legs of any transformation are always challenging, and this we have seen in the last two years when all companies struggled for growth,” a Cognizant executive said on condition of anonymity. “For all the five companies, digital is now a fourth of total revenue. So, without getting into the debate of digital definition, the heartening thing is that quality of revenue is only improving.”
Although all IT firms are moving away from a people-led model to a platform-based business approach, hiring by the largest IT firms still continues to be a dominant indicator of their prospects. These five companies together employed 1.17 million at the end of the June quarter.
“Growth is back,” a senior executive at TCS said on condition of anonymity. “Companies were always spending more on digital in the past. But now, what we are seeing is that if the traditional business can be done efficiently and if you have solution offerings like data analytics and AI (artificial intelligence) platforms, you will be able to differentiate from others.” “To us (TCS), the question of digital offsetting the loss in traditional is not relevant because there is enough and more work available and hiring is just one indicator,” said the executive cited above.
The June quarter net additions of the five companies is the highest in at least two years. The companies had added 26,565 people to their workforce in the three months ended June 30, 2016. Although TCS does not provide a growth outlook, the company is expected to exceed 10% growth in the current fiscal.