A top IT company recently conducted an exam in five districts of Andhra Pradesh. Over 1,500 appeared for the exam. Only 100 cleared it, and 37 made the final cut and received the appointment letters.

“We could have, in fact, absorbed all the 1,500 candidates. We have to begin the process again elsewhere. But what is worrying us more is the quality of output from engineering colleges. We are shocked to see hundreds of candidates failing to answer even basic queries,” comments the executive in charge of the IT company's recruitment process.

This is not an isolated case. The technology industry, for long, has been voicing its concern over the poor quality of candidates. It has, until now, managed to carry on largely because of ever increasing business growth. But with economic crises in the US and pockets of Europe, the industry has begun to worry more — lower revenue growth and higherpay packages could severely impact companies' bottom lines.

Their having to maintain a sizeable bench to fall back on, only aggravates the problem.

Come aboard

TCS, whose employee base crossed the 2-lakh mark, is planning to recruit 20,000 in the current quarter alone. Infosys will hire 45,000 for 2011-12. Mahindra Satyam would have 18,000 more staff this year. HCL Tech will hire 6,000 freshers in the first half.

Almost all the companies in the top and medium leagues have witnessed severe pressure on bottom lines in the first quarter. Mahindra Satyam has postponed wage revisions to the third quarter as against the usual first quarter. Though it is common for companies to report cost of salaries in books in the first quarter, the sharp increase in attrition, which is hovering at 25 per cent, could well have an impact on the subsequent quarters as well.

Four times more hands needed

B.V.R Mohan Reddy, Chairman and Managing Director of Infotech Enterprises, says lack of quality in fresh talent is forcing companies to tap from the same, limited pool, resulting in higher expectations from employees as they hop from one company to another.

The National Skill Development Corporation (NSDC), a Government of India agency, predicts that the IT and ITES industry would require 1 crore trained human resources by 2022 as against 22 lakh in 2008. During the period, the size of the industry would grow to $401 billion from $52 billion, growing at a compounded annual rate of 15.7 per cent.

This means that the industry needs four times more than what it presently employs. Bulk of them, about 69 lakh, would be required in the export segment.

The NSDC also gives a “pessimistic estimation” of the requirement in 2022. The industry would need 38 lakh employees, including 32 lakh for export segment, as the industry size grows to $227 billion ($52 billion) at a CAGR of 11.1 per cent.

The NSDC, however, feels that there is a distinct shift in the mindset of companies. “About 80 per cent of the IT exports segment is engineers and MCAs. The proportion of graduates from science and other streams is expected to grow to 15-20 per cent from the present 5-10 per cent,” it observes in its report, ‘Human resource and skill requirements in the IT and ITES industry.'

New biz models, technologies

Praveen Bhadada, Engagement Manager of Zinnov Management Consulting, feels the problem is aggravated in the current macro-economic and business environment.

“Most service providers historically looked at a combination of experience level, bench strength and utilisation rates to optimise on billing. However, as customers start expecting value beyond just cost arbitrage, they are putting pressure on these service providers to innovate and add value to the relationship,” he points out.

This spurs the service providers to move to new business models such as fixed price or risk-reward option and expand into new technologies such as cloud computing.

“The quality of manpower becomes a key differentiator for IT service providers in this scenario. So, even though all of these biggies hire in huge numbers from colleges, the demand for experienced talent is increasing in the market and that pool is only increasing mostly organically,” he says.

All these companies are competing for the same pool of people and invariably end up inflating the salary positions, which puts pressure on the bottom line, he observes.

Bench vs just-in-time hiring

Some companies hire just in time to avoid the hassle of maintaining huge benches (the buffer employees that firms maintain, anticipating urgent projects).

HCL appears to follow a just-in-time hiring policy, taking in mostly laterals after it gets a project, says an industry watcher.

Some other companies see risk in this model, though. If one hires the wrong kind of talent at the last minute, the quality of the project could be impacted, is the fear.

Non-linear growth

Companies are now starting to look at optimising the pyramid, increasing the utilisation rates and creating non-linear (people- independent) models to expand into their customer base. Integration of IT-BPO, platform-based approach and process templates are some models that companies are experimenting with, to optimise on cost.

Of all these, non-linearity is the biggest focus as it will be practically impossible for the existing set of $1-billion-plus companies to continue to expand linearly by adding headcount, feels Bhadada of Zinnov.

Infosys has a 23-week Global Education Centre to initiate new recruits into the company. Kris Gopalakrishnan, Managing Director and Chief Executive Officer of Infosys, told analysts after announcing results for the first quarter that the company is looking at a new need from clients. “We need to help out clients when they look at emerging new technologies and new ways of engaging with their service providers, such as moving to platform model or cloud-based model. This will also help us look at non-linear models of growth,” he said.

Infotech Enterprises too is trying out innovative methods. Beginning this academic year, Infotech has begun to work with the Jawaharlal Nehru Technological University (JNTU-Kakinada) to produce ‘employable' candidates. Top-level domain experts from Infotech, which is into GIS (geographical information systems) and engineering solutions, are teaching Avionics to MTech students.

“At the end of the course, we will conduct a formal test and take all of them. They are not under any obligation to join only our company. But what we are attempting to do is to create a talent pool that industry can use. We may replicate this model in some other colleges at a later stage,” says Mohan Reddy.

The company's salary costs went up by 44 per cent in the first quarter ended June 30, 2011, severely impacting operating margins. Its net profit reduced to Rs 27 crore as against Rs 33 crore in the comparable quarter last year as its salary bill ballooned to Rs 227 crore (Rs 157 crore) in the quarter.

Low-cost talent pool

Microsoft Corporation has a different view on this. The company, which has set its eyes on tier-ii/iii cities, believes there is a lot of talent in smaller cities. It has devised a 17-day Learning Engineering Accelerated Programme (LEAP) to hand-hold graduates to smooth-land in the company's culture.

Synopsys, a leading player in electronic design automation (EDA), has an agreement with around 200 colleges and institutes to provide licences for some of its products at a discounted price.

“What we are looking at is to build a skilled workforce for the semiconductor ecosystem,” Dr Pradip K Dutta, Corporate Vice-President and Managing Director of Synopsys India and Chairman of the Indian Semiconductor Association, says.

Pricing pressures and the need to remain cost-competitive will drive IT firms to develop a relatively low-cost talent pool.

The NSDC feels that potential areas for developing low-cost employees include process flows (such as credit card workflows), communication skills, IP (intellectual protocol) advisory and filing, understanding patents, legal transcription and modelling tools.

The NSDC report, prepared jointly with ICRA Management Consulting Services Ltd (IMaCS), stresses that modularised skill building in these areas could help the country train a projected workforce of 75 lakh people by 2022.

Of this, 70-80 per cent would be in the junior to mid-level streams. “Building skills in this workforce is critical for the IT and ITES industry to maintain its competitive edge globally,” the report points out.

Wielding steth and mouse

When a domain expert, such as a doctor or physiotherapist, is enthusiastic about IT too, it could be double blessing for the tech sector.

Take, for instance, Dr Srinivasa Murthy of Bangalore. An MBBS from Bangalore Medical College, Dr Murthy never imagined doing anything other than treating patients. But a few years into practice, he joined IT services firm Anthelio that specialises in servicing hospitals using IT tools.

“Earlier I could attend to patients in my locality. Now I'm able to reach out to a global audience through large numbers of hospitals that use our services,” he says.

Dr Vish, another medical doctor from Karnataka, too has a similar story to relate. “I think I'm in a different galaxy now. After practising medicine for some time, I did my MBA and worked at Accenture too,” he says.

Doctors working in hospitals need to know how to run and use IT applications and solutions. “Who can explain better than a doctor-turned-IT pro? A doctor knows workflows at a hospital perfectly and we began to scout for doctors themselves who can understand, willing to shift to a new calling,” explains Viswanath Sivaswamy, Managing Director of Anthelio Business Technologies. It is not just doctors who can turn IT pros. Nurses, homoeopaths, physiotherapists and students from science streams such as Botany and Zoology too could hope for lucrative IT employment. It would be line with what the National Skill Development Corporation seeks to do —

identify skill gaps and promote skill development programmes in association with the private sector.

> kurmanath@thehindu.co.in

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