Delayed absorption of campus hires is an effort to honor the offers companies made when the IT industry's perception was not as grim as it is today
For an industry that is worth USD 100 billion in revenues and accounts for 7.5% of the country’s GDP; the growth story seems to be wavering. The present sovereign debt crisis in the Eurozone has only added woes to the grim demand outlook thereby further jeopardizing revenue for the Indian IT-ITeS industry. While annual results and guidance shocked investors; the news of delaying the on-boarding of campus recruits by a quarter signals the tough times to come and at the same time, painting a gloomy picture for fresh hires.
IT bellwether, Infosys in particular has been in the news for some reason or the other. India’s second largest software services exporter disappointed investors with a weaker-than-expected revenue growth outlook for 2012-13. Besides the weak guidance, it also postponed considering a wage hike for its staff at the software services division by three months, citing a weak business environment. In the latest development, Infosys has delayed its deadline for on-boarding of 28,000 new recruits hired from campuses until mid 2013. According to media reports, the on-boarding process was originally expected to be completed by March 2013 but based on business imperatives and manpower requirements they expect the on-boarding of fresh hires to be completed by the first quarter of fiscal year 2014. The decision implies that students who have already got their offer letters from Infosys in 2011 will begin joining from September 2012, extending upto June 2013. As a matter of fact, in all large IT companies 70 percent of hiring is accounted for by campus recruits and this raises the issue as to whether a delay in the on-boarding process is unusual or not. In fact industry people believe that delay in on-boarding is not unusual. However, the same coming from the stable of Infosys raises an alarm as to whether it is an industry-wide phenomenon or not, and more so, does it signal a slowing growth engine for Infosys in particular. The delayed absorption of campus hires nevertheless is an effort by the company to honor the offers it made when the IT industry’s demand perception was not as grim as it is today. Perhaps this is the reason as to why there has been a 22 percent fall in its hiring target for FY’13 at 35,000 (including 18,000 from campuses this year) as against 45,000 it recruited in FY’12.
A huge bench and stressed pipeline of new projects could be the possible reason for the proposed delay. Whether the delay in on-boarding will help the company better its utilization ratio needs to be carefully observed in the times to come. Rishi Das,Co-Founder & CEO, CareerNet Consulting, reasons, “After the last slowdown, the larger guys were operating at 20-22 percent bench but now the bench will be 10-12 percent. Companies in the last 2-3 years are doing a lot of just-in-time hiring and not much of predictive hiring. Today companies are only hiring when they are getting projects and are not doing hiring in advance.” Interestingly, at face value it seems that the on-boarding delay seems to be limited to Infosys as other rival IT companies such as Wipro, Cognizant and HCL claim that their on-boarding process is on track. According to media reports, Wipro completed its fresher on-boarding by January; while for HCL Technologies and Cognizant Technology Solutions there has been no delay in their on-boarding schedule. However it is important to mention here that HCL and Cognizant follow different financial year calendars, so their timelines may not be strictly comparable to that of Infosys Nevertheless, a few industry insiders concur that apart from Infosys, there are a few mid-sized IT companies which too are delaying the process of on-boarding.
One of the possible reasons for delayed on-boarding would be the project pipeline that has taken a beating in the recent past. A possible way out would be to make good use of its USD 4 billion cash reserves and opt for inorganic growth. The conservative leadership at the helm of affairs at Infosys perhaps need to reboot themselves and get a bit more aggressive when it comes to acquisitions – domestic as well as overseas. Analysts are of the opinion that once the missing links are fixed and strategies put in place, the former poster boy of the industry will be back to run the show.
However the question still remains - Is Infosys merely signaling a trend that the industry will soon follow or is it a mere company specific issue? Industry veterans buy the latter logic. Ganesh Natrajan, CEO, Zensar Technologies, says, “If people are delaying it would be because of the effects of the global slowdown on their company. This is not an industry issue just company specific.” Perhaps it is too early to either discard the developments or to say that the industry is in a denial mode. Nonetheless, the delay in on-boarding of fresh hires does signal towards the incongruities and the state of affairs of the Indian IT-ITeS industry.