Being the country?s largest employer is the dubious distinction the Indian IT sector could have in the next five years as a consequence of its linear business model, spelling a massive organisational nightmare in the coming future.

Five years back, the entire IT industry employed seven lakh people. Today, the top five companies alone employ six lakh people and 19.8 lakh is the collective number of employees in the IT sector, already making it the largest private sector employer.

That?s not all. Software body Nasscom predicts that if the current 19% average rate of growth persists, the industry would employ 100 lakh people by 2020.

?The challenge for the IT industry when it reaches the 100-lakh mark in employment would be to manage the quality of employees and the company?s delivery mechanism. Though the headcount will grow, the intellect employed will go down,? says Sivarama Krishna, executive director, PwC India, adding, ?Moreover, presently 50% of the revenue of IT companies is spent on employees, whereas the people cost in MNCs is only 30% of their revenue. Thus Indian IT companies need better management in employee handling.?

Nasscom vice-president Sangeeta Gupta puts things in perspective when she says, ?Presently, the Indian IT-ITeS companies are inclined towards the linear model with x amount of revenues generating 0.8 x number of employees. The main reason for linearity is lower focus on hardware or products and greater focus on IT services.? On the other hand, MNCs like IBM and HP have a substantial focus on hardware as well, which makes their models inclined towards non-linearity.

And though the sector is shifting toward the non-linear model, analysts feel the transition is extremely slow and would take a minimum of three years to be of any consequence. Another concern for the IT industry is accumulated hiring at the bottom of the pyramid, comprising software engineers with 0-4 years of work experience. This accelerates the direct relation between revenues and employees.

Nitin Sethi, India practice leader (compensation), Aon Hewitt, a global HR consulting and outsourcing firm, says, ?Almost 80-90% of the hiring by IT firms happens at the bottom two levels of the pyramid, earning them a lot of revenues. These technicians are used for maintenance processes, application development, etc.? On the flip side, MNCs bank on consultants to derive them higher revenue per employee.

Apart from dependence on linearity, other reasons that will drive employee growth in the Indian IT industry would be the growing domestic IT services market, hiring by home-grown firms in other geographies and revival of the US economy.

Nasscom?s Gupta says apart from direct employment of 20 lakh, right now the IT industry also generates 3.6 indirect jobs across sectors for every direct job.