This is perhaps the clearest indicator of the state of the Indian IT industry amidst the global turmoil. India's second largest software firm, Infosys Technologies, has decided to freeze all recruitment for the next fiscal after it meets its target of hiring 25,000 people this year. Speaking on the sidelines of a CII summit, S Gopalakrishnan, CEO, Infosys, said, "We will freeze fresh recruitment, and will hire only for meeting specific skill needs".
The IT industry is expected to hire 2 lakh people this fiscal and the industry's revenues are highly linear in nature, which means proportionate to the number of employees. This is why the hiring guidance of companies is very central to the state of affairs and considered a better indicator of their confidence in the market situation. "The freeze in hiring was expected as there is no demand, not even the visibility of demand in the near term," said Harshad Deshpande, IT research analyst with Ambit Capital.
So far this year, Infosys hired 16,000-17,000 personnel, taking its total employee strength to over 1 lakh people. In terms of employees, Infosys is only second to TCS, India's largest software exporter, which had close to 1.21 lakh employees at the end of the second quarter. India's top five IT companies in terms of revenues also rank in the same order of their employee base.
Earlier, Satyam cut its hiring guidance to 8,000-10,000 people this fiscal against the earlier projections of 15,000. It has taken 5,200 on board in the first two quarters of the financial year. Infosys, however, has no plans to prune its hiring plans.
Industry experts say companies are trying to raise the utilisation rate of employees and re-locate them between departments. As attrition is low, fresh hiring could be low. "Next year could see very little hiring from the campuses as companies are delaying the joining offers made this year. Moreover, they will also save on the huge cost incurred on training the new hires," said an analyst with a brokerage firm. For instance, Infosys spends about $170 million a year on training alone.
As a spiral effect of the financial meltdown, the IT industry is facing huge pressures on demand and pricing. Industry watchers say pricing would be squeezed by 8-10%. According to Gopalakrishnan, the industry could see its growth rate halving to 15%. Industry body Nasscom had earlier projected a growth of 21-24% this year, lower than last year's growth rate of 30%.
Gopalakrishnan also said some customers are delaying new project allotments, adopting a cautious approach to the market scenario. However, in an interview with FE last month, Gopalakrishnan had said, "I don't think there will be any delays. We have received indications from some companies that they will be reducing their IT budgets for next year. However, some of them are also saying that their off-shoring allocation will increase". End of the year is usually the time when the budgeting season generally kicks off.