As the $254-billion IT industry experiences a resurgence in growth, outsourcing majors are increasingly focusing on hiring fresh talent to reduce costs and bring in younger, more flexible engineers.
This is aimed at stabilizing margins and improving operating metrics such as utilization and offshore mix, which are already at near peak levels for most software service providers.
Indian IT Industry Overview
The Indian IT industry, known for its robust growth and innovation, has seen a significant turnaround in recent quarters.
After nearly seven quarters of declining headcount, top Indian IT companies such as Tata Consultancy Services (TCS), Infosys, Wipro, Tech Mahindra, and LTIMindtree reversed the trend.
They added over 17,500 employees in the September quarter.
This hiring spree is part of strategy to adjust corporate staff structure by bringing in younger engineers to reduce costs.
The expansion of the workforce base will directly stabilize margins for software service companies.
According to Somnath Chatterjee, founder of Prismforce, a software provider to the technology services sector, “For a long time, abundant labor supply at the bottom of the pyramid (workforce) has been the biggest source of competitive advantage from a cost point of view for tech services players”.
This strategy provides a key pillar for margin upside, though it will take 3-9 months to bill freshers onto projects.
Outsourcing Industry: Recent Developments
The top four IT majors have committed to recruiting around 82,000 fresh graduates. Projections indicate that the sector could surpass 150,000 fresher hires in FY25.
This growth revival is a positive sign for the industry. Companies are investing in training facilities to stabilize the pyramid structure after a lull of almost two years.
Saurabh Govil, Chief Human Resource Officer at Wipro, expressed confidence in the industry’s margin accretion, stating, “Our biggest margin lever in the industry is growth. If we grow, our margin will improve because there is a certain fixed cost”.
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