Sea Change in Hiring for India Outsourcers

MUMBAI â€" Indian information technology outsourcers are relying more on experienced workers, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staffs.

The shift by Infosys and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, low-margin information technology and back-office services.

For young graduates who see the $108 billion I.T. industry as a sure pathway to modern India’s growing middle class, the transformation is unsettling.

Dozens of industry aspirants who were recruited by one of the smaller players, HCL Technologies, recently protested outside its offices in several cities. They were offered jobs in 2011, before graduating last year but have not yet been given start dates, much less paychecks.

HCL’s profit and revenue rose in the fourth quarter of 2012, while staff numbers shrank â€" a rare trick in an industry that has long aspired to break the linear relationship between head count and revenue growth.

Just 20 percent of the 5,000 to 6,000 campus recruits offered jobs by HCL in 2011 have been actually hired since graduation last summer, and HCL said it had made no offers in 2012 to students who would graduate in June this year.

Slower growth, fewer people leaving, greater demand by customers for experienced staff and increased productivity through automation and software have put pressure on all recruits, according to HCL, although it said it expected to accelerate hiring of entry-level staff beginning next August.

“It’s not that the demand doesn’t exist; it exists for different skills,” said Ajay Davessar, an HCL spokesman. “Typical roles, which a student thinks, ‘I’ll just go there and start coding, and have a good life,’ are being tested to reality.”

Tech Mahindra, another outsourcing company, is naming 100 managers to be what it calls mini-C.E.O.’s, who will be given broad latitude to run their parts of the business.

“We’re moving towards a situation like the developed economies, where we’re asking the people to be more deep,” said Sujitha Karnad, who heads human resources at Tech Mahindra. “We want more solution architects to be here.”

While plenty of Indian back-office work â€" like technical support, processing insurance claims and staffing call centers â€" will remain labor-intensive, software service companies are looking to move up the value chain, which means raising the productivity of staff members.

Growth in revenue per employee across the industry could expand to 5 percent a year in the next two years from about 3 percent over the past five, said Frederic Giron, principal analyst at Forrester Research. The growth rate is likely to accelerate starting in 2015, as work based on intellectual property accounts for a growing share of the total, he said.

The information technology service industry developed in India in large part because of the availability of inexpensive skilled labor, an advantage that is eroding as wages and other costs rise in the country. In years past, it was cost-effective for I.T. companies to hire new graduates by the thousands and keep a portion idle, awaiting deployment on a client project.

But budget-constrained clients now demand shorter lead times. I.T. vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a consulting firm for staffing.

Traditionally, about 30 percent of Indian I.T. workers are idle, or “on the bench,” at any time, often in training, as they await deployment. In the quarter that ended in December, about 70 percent of Infosys staff members were deployed on billable projects; the figure was less than 65 percent at Wipro.

A version of this article appeared in print on March 26, 2013, in The International Herald Tribune.