While hiring had picked up in fiscal 2003, the fact that it continued through 2004 is a sign of the depth of the recovery.

According to Dataquest estimates, the Services export industry in fiscal '04 had 1.4 lakh employees. Multinational software development centers put together had grown from 40,000 to 60,000. The domestic industry had a head count of about 75,000. In addition, DQ estimates that small software companies with an average of 10 people or so together made up for about one lakh people. Put together, about 380,000 people now work directly in the Indian IT industry. If one were to add other related jobs like manufacturing jobs in IT (Moser Baer alone has about 5500 people), small maintenance outfits and retailers, we estimate the total IT related headcount at about 4,35,000 in fiscal '04. This is up from 3,71,795 in fiscal '03, a growth of 17%.

The BPO industry in addition created about 80,000 new jobs during the year and now hires 249,900 people. Together, the IT and BPO industry hire 684,900 people–arguably the fastest growing job market in the country.

Changing Times
What is more significantly a sign of the times, however, was the kind of people the software services export industry hired. In fiscal 2003, most of the hiring had centered around people with at least 2-5 years of experience or more. Freshers had found themselves left out in the cold with a lot of campus hiring letters not honored.

That changed during last fiscal. "Close to 60% of people hired during the year were freshers or entry level recruits. And a bulk of those-nearly 55%-were picked up from campuses," says E Balaji, general manager, Staffing Solutions Group, MaFoi Management Consultants.

This new trend heralded another one – the return of the bench. Through 2002 and most of 2003, the IT industry was still focused on just-in-time, project based hiring. Basically, that meant they hired people who were productive from day one, and they hired them only when they had a project in hand.

That too changed. "Companies are now involved in creating a pipeline of talent for themselves among the freshers, which means hiring them early and training them indoors," says Balaji.

"The rate of hiring among freshers can be assessed by the fact that companies are picking them up during the sixth semester in an eight semester course and that has not happened in sometime. This means that a whole lot of people with general skills are being taken in, driven largely by the huge amount of projects that are coming into the country," says Mohan Kannegal, director-Technology and Content for MeritTrac, a third party candidate assessment service provider for IT recruitment requirements.

As a matter of fact, across the industry the percentage of employees with less than two years of experience has grown from just 19% in fiscal '03 to a good 33% and 27% for the domestic and export companies.

Back to Ramp Up Mode
This kind of ramp up makes sense in the peculiar services model of the Indian software exports industry. Still driven by volumes, growth of export revenues is directly correlated to the number of heads the industry hires. In fact, over the past couple of years as billing rates have declined, headcount in a company has often grown faster than either revenues or profits.

For instance, during fiscal 2004, Infosys (including Progeon and Infosys Australia) added a total of 8,021 jobs-a 52% increase in headcount against a revenue increase of 31%. Wipro (including Wipro Spectramind) added 9,655 people during the year-a good 47% increase in head count. Together, the top five software companies alone added 34,496 people, contributing to 24% growth in the IT industry, including BPO.

While this pace of hiring made life a lot more difficult for HR heads last year, employees have only gained. Not only were there more jobs to go around, but salaries had also increased. According to preliminary industry estimates (for more details check out DQ's Salary Survey this September), wages had increased between 17% to 20% across the board.

This was especially true of project leadership posts where the lack of a proper talent pool continues into its seventh year. In a growing industry that means that project leaders have the choice to skip to newer jobs, often with up to 50% hike in salaries. The industry expects hikes for project leadership skills to double in 2004-05.

But, while the increased hiring might have its pros, one of the major cons is a marked increase in attrition. While last year the attrition rate in the IT industry was 8%, 2003-04 saw a discomforting 12% increase.

As Balaji puts it, "With more jobs and more salaries constantly beckoning, there will be more risk taking behavior among employees. Attrition was less than 7% in IT two years back, but as the economy picks up, people will be more exploratory and will tend to move more often."

In the Eye of the Storm
In BPO, jobs continue to boom as in fiscal '03. With more than 79,900 new jobs being created last fiscal, the industry saw salaries increasing across the board over the year. BPO employees continue their unabashed jumps in jobs and attrition levels remain at disturbingly high levels of around 50%.

Contributing to attrition levels is the high degree of poaching between companies. BPO players continue to draw employees from each other, if not directly then through their recruitment partners-agreements notwithstanding. A lot of poaching is now happening at the mid management layer too-understandable in a young industry where mid-management experience is difficult to come by. Two new trends of the year were a move to non-metros and an ongoing experiment to change the age profile of employees.

With demand side pressures increasing even as cities like Bangalore reached saturation levels, the industry started looking for places like Coimbatore, Cochin and even Tumkur, 70 kms from Bangalore. That comes though, with its own set of challenges.

"When companies move to smaller cities in search of good talent, the law of diminishing returns sets in. While the conversion rate is only 4% in the big cities, it dips even lower in the smaller cities," says Mohan. Conversion rate is the percentage of people a company ends up hiring from the number it actually interviews.

A result of that is the boom of recruitment processing companies. These companies have tie-ups with specific BPO players for whom they conduct first level assessment tests (including psychometric testing), clear the most suitable candidates for immediate jobs and put the remaining promising candidates on a training program. The idea is to increase the conversion rates to at least 8% and to find "the most suitable" candidates specific to a company's culture in the hope that attrition comes down.

Third party testing for recruitment, though growing as a popular option, is far from becoming a standard. Its success has so far been dubious, though the industry predicts that the trend might be more visible in fiscal '05.

Skills in Demand
In the year gone by, Java was big, so was C++ and both continue to be areas of hiring to watch out for.

"Strong growth happened in the ERP segment as well, especially SAP, along with J2EE. Skill requirements in the embedded systems area, though not large, are growing. There will be a lot more action from that area in 2004-05. Business intelligence is a hot new area. As IT outsourcing grew, system administrators were being hired in enormous numbers. Something that has not happened in the past," says Mohan.

"Data warehousing, EAI and SAP (implementation and technical support) are hot right now. CRM, Siebel and Unix skills are also being hired a lot more than a year back," adds Amitabh Kapoor, GM – IT Search of Quadrangle, the sister organization of Naukri.com focused on IT hiring.

A fallout of the economic downturn of the last two years, fiscal '04 saw a lot of NRIs return to India to either set up their own companies or join existing ones. Though the numbers are relatively small-an estimated 5,000 people returned-they brought with them both product -riented skills and mid-management experience.

The BPO industry during the year saw a growing demand for domain skills, team leader and middle-management experience even as good old English speaking skills continue to top the demand charts.

Summer in the Air?
"The last two years did not see the kind of hiring happening now since the industry was in a slump. There were very few jobs to go around and no one was ready to invest in training. They wanted people who were productive from the first day, which meant they went for the well experienced. But now it's back to hiring big time-more freshers and loads of new jobs are being created. It's almost boom time for job-seekers," says Amitabh.

But this is a slippery territory as high levels of hiring come with a host of associated problems. For one, the mere process of hiring takes up so much of HR management bandwidth that other HR processes tend to suffer. For another, hundreds of new faces in the organization take time settling in, disrupting the organization's culture in the meantime. In the case of companies like Infosys and Wipro that was nearly 9,000 new faces.

In addition, a bench creates disgruntlement. Though benching levels are now reasonably low at 5% or so, disgruntlement will grow if the bench does. Most of all, a booming job market will see attrition rise once again. It is not clear as yet whether the industry has learnt the costs of indiscriminate over-hiring that had led to a great deal of turmoil in the last downturn.

In the BPO industry, a growing influx of projects has seen younger and younger people being moved up to management levels. While this is good news for the employees who have a quicker growth path now available to them, it might not necessarily be good news for the employers. Young 26-year-olds, managing a couple of hundred people is not exactly reassuring news.

That said however, fiscal '04 was great for job-seekers and fiscal '05 is expected to continue to be good. For HR management teams in companies though, a new set of challenges lie ahead.

Sathya Mithra Ashok in Bangalore

Page(s)   1