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Friday, November 14, 2014

Crisil on Reducing IT jobs in india

November 10, 2014 1 www.crisil.com
November 10, 2014
Mumbai
Incremental IT services jobs will halve in four years
For future job aspirants, this will mean fewer opportunities and adding to skillsets
Changing business models of vendors will lead to cherry-picking and more lateral hirings
CRISIL believes incremental recruitment by the information technology (IT) services industry, which
accounted for nearly a quarter of the organised private sector employment in India in fiscal 2014, will
halve by fiscal 2018 despite a 13-15% growth forecast in the industry’s revenues during this period.
This contrasts with the hiring pattern of the last decade, which had mirrored revenue growth in the
industry. The paradigm shift will come as IT services vendors struggle to crank up profitability in a
milieu where global weakness is forcing their clients to optimise costs to hold on to margins. On their
part, vendors responded by rationalising their bench strength, improving utilisation rate and trimming
operational costs.
Equally importantly, this has ramifications for future engineering graduates because it will narrow the
opportunities available in future.
CRISIL believes despite revenue growth, companies will run very tight ships because of which
incremental employment will be curbed. Vendors are gradually adopting just-in-time hiring and
increasing the proportion of fixed-price contracts in their portfolio, which reduces the need to maintain
flab on the bench. Additionally, they are migrating towards higher-value service offerings such as
consulting, investing in intellectual property (IP)-based products and leveraging on the emergence of
social media, mobile, analytics and cloud (SMAC). Says Ramraj Pai, President, Business Head –
Ratings, Large Corporates, CRISIL: “These initiatives will increase revenue per employee
(RPE) at a compounded annual growth rate of 7% between fiscals 2015 and 2018. This, along
with improvement in employee utilisation, will over time delink hiring from revenue growth.
We also foresee a transformation in the recruitment pattern where employers become more
focused and picky, increasingly seeking specific skill sets. This will lead to greater lateral
hiring.”
India’s IT sector, with revenues of $118 billion in the last fiscal, employs 3.1 million people, or around
24% of organised private-sector employment in India. The sector has practically driven growth in
organised private jobs in the country over the past decade. Its initial phase of high revenue growth
between fiscals 2003 and 2007 also saw a substantial growth in recruitments. This was followed by
the global financial crisis between 2008 and 2010 and moderate recovery during fiscals 2011 and
2013. Yet hiring rates mirrored revenue growth. CRISIL believes the sector is now entering a new
phase where this will gradually delink.
Says Anuj Sethi, Director-Ratings, CRISIL: “We believe despite healthy revenue growth of 13-
15% for IT services foreseen in the medium term -- aided by recovery in discretionary
spending by clients -- job additions will gradually shrink by about 50% to 55,000 by fiscal 2018
from 105,000 in fiscal 2014, as companies opt for more-focused, higher-value initiatives.” This
process has already been set in motion, as evidenced in the reduction in employee costs from 69% of
total costs in fiscal 2013 to 64% in the last fiscal.November 10, 2014 2 www.crisil.com
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About CRISIL Limited
CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's
leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading
corporations.
About CRISIL Ratings
CRISIL Ratings is India's leading rating agency. We pioneered the concept of credit rating in India in 1987. With a tradition
of independence, analytical rigour and innovation, we have a leadership position. We have rated over 75,000 entities, by
far the largest number in India. We are a full-service rating agency. We rate the entire range of debt instruments: bank
loans, certificates of deposit, commercial paper, non-convertible debentures, bank hybrid capital instruments, asset-backed
securities, mortgage-backed securities, perpetual bonds, and partial guarantees. CRISIL sets the standards in every
aspect of the credit rating business. We have instituted several innovations in India including rating municipal bonds,
partially guaranteed instruments and microfinance institutions. We pioneered a globally unique and affordable rating
service for Small and Medium Enterprises (SMEs).This has significantly expanded the market for ratings and is improving
SMEs' access to affordable finance. We have an active outreach programme with issuers, investors and regulators to
maintain a high level of transparency regarding our rating criteria and to disseminate our analytical insights and knowledge.
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Last updated: August 2014
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CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or
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CRISIL Limited
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Ramraj Pai
President, Business Head – Ratings,
Large Corporates - CRISIL
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Email: ramraj.pai@crisil.com
Anuj Sethi
Director - CRISIL Ratings
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Email: anuj.sethi@crisil.com
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