Indian tech entrepreneurs reading signs of recession don?t seem too different from Alice struggling with a looking glass book in the classic Alice in Wonderland. ?If I hold it up to a glass, the words will all go the right way again,? she had found her solution. The puzzle seems tougher for the industry in search for the ?right looking glass.?
Industry body Nasscom is relooking at its earlier growth forecast and says it can come out with an outlook only in third week of this month. As they await the final predictions, industry is adjusting to life in the slow lane. Even the current projection of 20-24% growth given out by Nasscom was a downgrade from 30-32% in the last few years. Insiders expect the annual wage hike for the Indian IT industry going down from 13-14% in 2007-08, to a single-digit 8-9% this fiscal. Silver lining comes in the form of lower attrition rate, estimated to be down by 6-7%.
Breakneck pace of grow th is giving way to single digit growth levels. Wage hikes as well as attrition levels are likely to dip below 10%. Employment indices are also headed southwards. IT industry has seen an 11-point dip in the employment outlook index between October and December 2008 to 64 index points, according to Employment Outlook Report from staffing company TeamLease Services.The business outlook index too is at an all time low of 56. ?The last quarter for this calendar year draws a grim overall outlook and continues to negate the employment growth in India,? says Sampath Shetty, vice-president, TeamLease Services.
While hiring is slowing down in most industries, IT and ITeS seem to be among the worst hit. ?IT and ITeS could be particularly hit owing to the global financial meltdown and large companies are gearing to slash new hiring, confirms K Pandia Rajan, managing director, Ma Foi Group.
Even as the cold truth is sinking in, large IT companies are not ready to make public the future impact of the economic meltdown on their existing employees and future recruitment. ?We would not like to make any comments,? comes the standard reply from Cognizant Technology Solutions when quizzed on troubles facing an HR executive today.
Cognizant is not alone. Companies like Tata Consultancy Services (TCS) and Wipro, are not ready to discuss the crises either. TCS is more comfortable talking about positive things like the best ways to keep the morale of the employees high.
?Organisations need to proactively address employee concerns and reassure, engage and motivate a global workforce in a volatile business environment,? says Ajoy Mukherjee, head, global HR, TCS.
It is the Infosys co-founder Nandan Nilekani who sums up best the realistic scenario: ?There is an overall slowdown, which is understandable given the crisis.? His rationale is that it was not possible for the IT sector to live up to the high growth rates of the last four to five years. Interestingly, Infosys had earlier scaled down its dollar guidance by about 3% for the full year. The company is planning to offer some of its employees a one-year sabbatical with 50% salary, say unconfirmed reports.
Echoing similar sentiments, a senior Wipro executive laments: ?The IT companies have deferred the recruitment of new entrants;including those coming out from the first-grade engineering colleges. We can?t estimate how long this will continue. After the new year, when we will understand how much expenditure cut companies have decided to make, we may start man power planning.? If Romit Dasgupta, director?technology, Globsyn group is to be believed then the IT sector, especially in the small and mid segment, may witness a series of mergers, acquisitions and alliances at the complementary services level. ?Industry may see less recruitment after the acquisition process is over, but companies may not go for lay-offs as they would always want productive people to stay so that restructuring could be efficient,? he adds.
On the flip-side though, there is strong belief that the lower wage rate will not lead to a higher attrition rate. In the last six months of the current fiscal, the attrition rate was down by 6-7% and that substantially benefited the Indian IT companies. Broad contours of these findings by Nasscom point to forces that would largely contribute to keep IT export services growth rate above 20% in the current fiscal.
Nasscom president Som Mittal says that it was too early to speak about depression in the IT sector. ?There would be some impact, but right now, we can?t say how intense it would be. We still think the export projection for the current fiscal will be on track.?
In the beginning of the financial year, Nasscom had projected that IT export would grow by 21-24% and the domestic sector by 25%. Mittal thinks that there may not be much impact on the export market, but domestic IT business may witness a fall in growth in the next two quarters.
In 2007-08, total IT exports from India stood at $40 billion and the domestic business at $11 billion. Mittal believes that IT companies would hire less in the current fiscal and are working hard to improve the utilisation numbers. He is confident that there wouldn?t be any major layoffs in the industry. ?Lay-offs could happen in small firms, but the employment scenario will remain stable for large IT companies,? he adds.
If the Teamlease employment outlook report is to be believed, there is good news for the country?s ITeS sector. Comparing the last two quarters to this quarter, there is a gradual increase in employment outlook index points of the ITeS sector. Among the cities, there is an increase in employment outlook index points of Hyderabad and Pune. At the same time, there is a decline in index points of Chennai, Mumbai, Bangalore, Delhi, Ahmedabad and Kolkata. Shetty of Teamlese says the IT sector has shown a steady slowdown in hiring in the last few quarters, which is indicative of the maturity of this sector. On the other hand, the ITeS sector has been volatile on the hiring forecasts in the last few quarters.
But for Subramanian A, senior vice-president, HR, at Bharat Matrimony, not everything is associated with gloom and doom. ?As HR professionals, it is a challenge for us how not to loose the core people in the organisation and make them more productive.? Brief for the HR departments seem to have taken a U-turn in the slower lane. For the likes of Subramanian, the job is to retain, engage and make employees more business sensitive in recession time. This definitely ought to be music to the ears of the panic-stricken techies out there in the industry.