Latest quarterly numbers from information technology (IT) companies reinforce that this is one sector that is not just surviving but thriving, despite disruptions wrought by Covid. Top-tier players in the sector have beaten market expectations with 4-7 per cent growth in sequential revenues and double-digit profit growth, on the back of rising large deal wins. With the pandemic forcing industries worldwide to migrate to cloud services, embrace digital transformation and leverage data for customer retention, global IT outsourcing spends which inched up by less than 2 per cent in 2020, expanded 8.5 per cent in 2021 and are expected to sustain this pace for the foreseeable future. The turnaround in the fortunes of Indian IT, which had been written off as a maturing sector just three years ago, is having an unexpected positive fallout for the economy in the form of a resurgence in white-collar hiring.

Data from Kotak Institutional Research show that the top six IT services firms made net headcount additions of over 86,000 employees in the September quarter of 2021 – the highest pace of quarterly additions in eight years and four times higher than the 19,000-odd additions in the same quarter of 2020. In contrast to earlier years when IT firms were mainly mass-recruiters at campuses for entry-level jobs, today they’re also head-hunting for skilled professionals who can fill mid- to high-end roles in full-stack development, user interface and design, data mining, machine learning and cyber-security. All this is certainly good news for the economy as it looks to forge a recovery from Covid, as the white-collar IT workforce has always been the driving force behind demand for everything from residential housing to discretionary goods and new-age consumer services.

The boom however, is turning out to be a mixed blessing for IT services firms as they’re having to compete for prime talent with both the Indian arms of multinational corporations and the burgeoning ranks of well-funded local start-ups. IT services firms are already beginning to complain not just about soaring attrition levels (at 20-25 per cent) but also about unrealistic compensation packages that narrow the labour cost advantage that has traditionally propped up their margins relative to Western rivals. But rather than look to external sops to solve this problem, the industry may need to redouble efforts to expand and upgrade the domestic talent pool it taps into. While IT players and engineering colleges are already collaborating to impart on-job training through internships to final-year students, the engagement needs to be deepened to ensure that college curriculums are updated to cater to evolving global requirements. The rise of remote working allows IT majors to invest in training and skilling facilities in Tier 2/3 towns, so that hiring can be broad-based beyond metros. To ensure their employees are future-ready, firms may also need to focus less on utilisation rates and allow paid sabbaticals so that employees can step off the treadmill to acquire new skills and higher educational qualifications to remain relevant.

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