Contract hires answer to talent crunch at IT firms

Written by Diksha Dutta | Diksha Dutta | New Delhi | Updated: Mar 23 2012, 22:26pm hrs
NIIT, HCL, Wipro & Capgemini prefer this route over permanent staffing

Unpredictable contracts, need for niche talent and increasing dependence on internal promotions is reducing the demand for permanent or contingent recruits in the IT sector.

After strutting through a year of ups and downs, the IT sector is now preferring contract hires or temporary staff to fulfil its talent crunch as and when it arises. Companies such as NIIT Technologies, HCL Technologies, Wipro and Capgemini are looking at hiring niche talent for special contracts rather than keeping permanent staff.

Surabhi Mathur-Gandhi, vice-president (IT sourcing) at Teamlease Services, said, In fiscal 2012, contract hiring increased by 40-45% over fiscal 2011 and there has been a decrease in contingent hiring by 20%. There are companies like Capgemini, Wipro, HCL and NIIT Technologies that are going on this path. There is reduced demand for permanent staffing requirements, which are usually employees with expertise in plain vanilla services like coding. This is a challenging period for recruitment firms as they have to work harder in order to search niche skills in cloud computing or SAP and we as vendors are seeing a shrink in the permanent hiring demand by IT firms. She added that there is ambiguity in the market right now and hiring is slower because of cautiousness by IT companies.

Mid-sized IT companies are feeling the need to hire niche talent, too. Bhaskar Chavli, chief delivery officer, NIIT Technologies, said, In the past six months, we have seen potential customers which start at a short notice and their budget is also decided while giving us the contract. Usually these skill sets are niche and are not vanilla skills. Contract needs are short-term for niche skills and do not have scalability and long-term use.

TeamLease reports that three quarters back, plain vanilla services requirement in the industry was 70-75% of the total skills required, and the rest was for niche services. But since then the demand from niche services has increased from 25-30% to 40-45%. IT industry is estimated to close the fiscal 2012 with an addition of around 230,000 jobs indicating rise in hiring, but decrease in permanent hiring.

HR firms are feeling that they are not approached with bulk contracts by the IT companies anymore. Thiru, leader, human capital advisory services, Deloitte India, said, Contract and just-in-time hiring has been going up, even though niche talent is not easily available. These are not purely volume games and usually IT companies are not that dependent on HR firms for this.

Ravi Shankar, senior vice-president, human resources, HCL Technologies, shares the same opinion. The contract staffing industry has definitely seen a boom in the recent years. The rapidly growing trend of contract staffing has given some companies a chance to reduce their budgets and still get the project completed within the given time frame. As competition forces businesses to continually become leaner and more flexible, the importance of focusing on core business has driven the industry to turn to go for temps, Shankar said.

Though employee referrals have been in industry for over 30 years, HR firms say that it was not explored by mid-sized IT companies. In addition to the monetary bonus, many mid-sized IT companies are giving an added advantage to the whole process by giving points that can be redeemed to gifts, making it much more attractive for the employers. This, too, is getting less business to HR companies.

Our initial preference for hiring employees is through internal search followed by references. Thereafter, through a mix of sources such as job boards and employee referrals; networking sites and placement consultant vendors. Dependence on placement consultants or vendors for junior levels has been diminishing except while addressing certain temporary spikes in requirements, Shankar said. Even NIIT does 20% of its recruitment through employee referrals.