The slowdown in the information technology sector seems to be prompting companies to change their hiring methods. A Business Standard report today says that tech major Infosys has decided to hire tech graduates as paid interns instead of taking them on their rolls.
The Indian IT sector, a key job creator, has been witnessing a crippling demand slowdown due to wobbly recovery in global economy and the shift in business model of companies.
Hiring in the Indian IT sector in the first half of this fiscal was down 24 percent to a net of 29,686, according to a report in MoneyControl. The top four Indian IT companies hired 14,421 candidates in September which was 43 percent less than last year.
Infosys’s latest move will only drive the wedge deeper accentuating the dry patch the sector is experiencing in the recent past.
One of the reasons could be the change of guard in the US with President-elect Donald Trump set to take charge on January 20, 2017 and his oft-repeated speeches harping about jobs being sent offshore rendering the locals jobless. On 2 December 2016, Trump warned that US companies would face "consequences" for outsourcing jobs abroad, as he touted his early success in persuading an air conditioner maker to keep about 1,000 jobs in the United States rather than move them to Mexico, according to Reuters. Trump did not say what those consequences would be.
Another reason could be the change in visa rules in the UK announced last month. Under the new visa rules announced by the UK Home Office, anyone applying after November 24 under the Tier 2 intra-company transfer (ICT) category would be required to meet a higher salary threshold requirement of 30,000 pounds from the earlier limit of 20,800 pounds.
The ICT route is largely used by Indian IT companies in Britain and the UK's Migration Advisory Committee (MAC) had found earlier this year that Indian IT workers accounted for nearly 90 per cent of visas issued under this route.
Though Infosys has not spelt out any reasons for its change in the company’s hiring decision, experts in the industry point toward a couple of reasons for the change.
Kris Laxmikanth, chairman and managing director, The Head Hunters India, Bengaluru, and visiting faculty, Institute of Management, Ranchi, says that the requirements of the industry have changed over the years. The industry is no longer job-focused as it was earlier but is more tech-oriented.
“Earlier, the overseas clients of the tech majors in India would be apprised the headcount of people working on a project. The payment would be made accordingly.”
That has changed with clients only interested in the project and not about the number of people working on it. So tech graduates can be easily replaced with MCAs (Masters of Computer Applications), too, an HR policy many tech giants adopt to economise on large payout to tech graduates.
The aggressive growth witnessed in top IT firms in India until 2014 has been slowing down and that is another factor that is coming into play for the changes in hiring decisions, says Dhruvil Sanghvi, CEO and Co-Founder, LogiNext, a big data analytics firm.
The competitors for the Top 5 IT firms are the second best or even third rung IT firms with lowered costs and at par performance. Not surprisingly, clients prefer to give them the projects instead of only the top 5 or even 10 firms.
“Rather than losing out on their clients, Infosys and other IT majors would prefer cutting down on hiring or make strategic hiring decisions to cut costs,” says Sanghvi.
Campuses will not balk at the recent change in hiring method of Infosys, feel analysts as this decision does not impact the Indian Institutes of Engineering (IITs) and top IT colleges in the country. “Top tech majors also go to tier 2 and 3 cities to hire campus recruits. It is students in these colleges who would be affected. But that is not the way most would see it,” said an analyst, who felt that with hiring coming down in the sector over the years, a fresher would consider it 'better to have an Infosys on his/her résumé as that would still open doors in other firms later'.
The hiring change in the decision of Infosys will not affect those companies that go in for fewer campus hires. Like ThoughtWorks, an American MNC headquartered in Chicago (Their India HQ is Bengaluru), for instance. “We hire around 150 campus recruits,” said Sudhir Tiwari, Managing Director, ThoughtWorks India. He said that around 10 percent of their recruits comprise of diploma holders. He hoped the change in hiring by Infosys would result in 'closing the gap between industry demands and academia, which was not in sync in India," he said.
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Updated Date: Dec 23, 2016 18:47:10 IST