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Crisil predicts new IT jobs will fall by 50% in four years

Mon, Nov 10, 2014, 03:02 PM
Mumbai, Nov 10: Leading analytical company Crisil predicted that new hiring in the information Technology sector could drop by 50 per cent over the next four years. This is in spite of the industry's 13-15% growth forecast in its revenues during the same period.

According to a report released by Crisil on Monday, the prediction is highly negative for lakhs of engineering students in the country. The IT sector has been the biggest employer in the private sector in India.

This prediction is in contrast to the hiring pattern of the previous decade, which mirrored the revenue growth in the IT industry. The shift in hiring patterns will come as IT services vendors are struggling to improve profitability in an environment where global weakness is forcing their clients to optimise costs to hold on to margins.

Vendors are, therefore, responding by rationalising their bench strength, trimming operational costs and improving utilisation rate.

This is bound to have ramifications for future engineering graduates as it is bound to narrow the opportunities available in future.

Over 7 lakh engineering students graduate every year and in 2013-14 the IT industry is estimated to have employed about 1.5 lakh engineers. The sector currently employs 31 lakh people, which is 24 % of the total private sector jobs in the organised sector.

The sharp decline will impact the overall hiring sentiment in the economy. At the same time, the central government will have to speed up growth in the manufacturing sector to provide an alternate source of employment to the young engineering graduates.

The growth in IT jobs is slowing down as the margins in the $118 billion outsourcing industry are under extreme pressure. Companies like TCS, Infosys and Wipro, which earn almost three fourth revenues from North America and Europe, are experiencing anemic growth.

With a result, clients are telling such companies to cut costs.

As employee salaries account for the biggest cost component for IT companies, domestic outsourcers are cutting down on bench strength, attempting to improve utilisation rates of employees and are reducing other operational costs, Crisil report says.

With employee cost in 2013-14 accounting for over 60 per cent of total cost of IT companies, Crisil said companies will run on tight ships and as a result incremental employment will be curbed.

The report also said that IT companies are slowly migrating towards fixed price contracts that eliminates the need for maintaining a large workforce for billing purposes.

Indian IT companies are preparing strategies to move up in the value chain towards services like consulting and software products, Crisil's report said. Global majors like IBM and Accenture are at present dominating such services as have higher revenue per employee in spite of comparable employee bases.
Agency: Ap7am Desk
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