Jobs ahead! IT firms step up hiring, but face talent gap hurdle

IT firms have stepped up hiring of freshers. Wipro plans to hire 30,000 more freshers in FY23. It says it's on course to onboard 70% more fresh talent from the campus in FY22 over the previous year. TCS has added 34,000 freshers in Q3 itself and expects to hire more during the ongoing quarter. “We have taken up our graduate hiring programme to 55,000,” Nilanjan Roy, chief financial officer at Infosys said during the Q3 earnings call last month.

In the October-December quarter, Infosys’ voluntary attrition percentage (LTM-IT services) stood at 25.5% compared to 11% in the year-ago quarter. Wipro’s attrition rate during the quarter stood at 22.7%. TCS said that it has restricted attrition at 15.3%, “lower than industry standards”.

In an interaction with Fortune India, Tech Mahindra’s managing director and CEO CP Gurnani had mentioned that overall demand has increased and companies should have alternatives in place to conduct business seamlessly. “If say, my original business plan was at 12-25% attrition, now I need to make the business plan at 18-20% attrition and then find ways to fulfil the requirements,” Gurnani had said.

India has a sizeable STEM (Science, Technology, Engineering and Mathematics) graduate supply, estimated at some 2.14 million annually and which also translates into the second biggest pool of STEM students globally, next only to China. However, only about 35% of such graduates are employable in the tech sector. This is worrying when one considers the industry discourse, projecting new-age digital skills like AI, ML, low code development and cybersecurity to become base skills by 2030.

The predictions are certainly not without foundation: the pandemic has nudged companies across segments to rethink their business models by adopting new-age tech capabilities or what is called ‘digitalisation’ in industry parlance. Increasing technology adoption across domains such as cloud computing, and AI/ML is driving the demand for digital tech talent across industries, says Nasscom.

Reskilling freshers and employees has been the key strategy that IT companies have been leaning on to meet the deluge of demand but that may not be enough given the digital boom; there needs to be a firmer plan at play. As Rituparna Chakraborty, co-founder & EVP at TeamLease, points out: “Reskilling is a short-term tactic. It is like a band-aid to the problem. If the material you are trying to reskill itself doesn’t have a strong foundation, there is a limit to which you can do upskilling of individuals.”

Consider this: although the tech industry’s digital talent is supposedly growing as much as five times faster than core tech talent accounting for about 30-32% of total tech talent — thanks to reskilling initiatives, the demand supply gap for digital talent is still expected to increase by three times by 2026, says Nasscom. In absolute numbers, there would be a shortage of about 1.4 to 1.8 million skilled talent in the market.

“Why did Infosys set up a training centre in Mysore? We know that only 20-30% of the candidates are employable. If they have to hire on a large scale, they have to train them for six months and then deploy them,” says V. Balakrishnan, ex CFO at Infosys.

And reskilling is not without costs. “For six months they are trained. During this period they are not employable but they are paid salaries. So the cost of reskilling would roughly amount to six to eight months’ employable salaries,” explains Balakrishnan.

Reskilling in India lags pace, acknowledges Nasscom. This comes even as about an estimated 280,000 employees were reskilled in the current financial year.

“We have to make sure that the new age skill sets become embedded in the school curriculums and in a scalable manner. Right now, there are only a handful of private schools which have started doing this,” says Chakraborty.

She opines that a long term strategy is required to bridge the talent gap and the government needs to intervene. “Most institutions in the country are government owned and managed. Maybe, schools can be incentivised to establish adequate infrastructure. If need be, a fund can be created. Budget after budget, we hear about wanting to make India a centre of excellence but to actualise it, only skilling and reskilling will not help,” adds Chakraborty.

The university curriculums need to be aligned with the industry requirements, seconds Balakrishnan. “India’s universities lag in terms of industry-academia tie-ups required to provide market ready training, internships and learnings to graduates,” says Nasscom.

The current tech talent crunch is being shaped up due to various factors. For one, Covid-19 has boosted the growth of the freelancing industry. “During the pandemic, a lot of people started working from home. They now feel convenient to work from anywhere and freelance rather than going to the office and working full time,” says Balakrishnan.

Besides, tech startups are attracting skilled talent with heavy compensation packages. “The only immediate way out for IT firms is to retain the existing talent by paying better, reskilling them and making sure that attrition is controlled,” observes Balakrishnan.