Monday, June 02, 2008

The global economic slowdown-impact on Indian IT industry?

A business journalist reached out to me over the weekend to get my perspective for a story she is doing on the 'hiring trends' as a result of the 'impending global slowdown'. Since I am travelling, the exchange was by mail-via a questionnaire-and so I am not too sure if I have addressed queries/issues she may have liked ;-)! I am positive-had it been a phone call-we could have had a more interactive session and we would have been able to brainstorm a little better.
However, here is the transcript -and so I shall be glad to hear from you-as before -both offline and online- about your views on the subject..

What are your IT clients – Tier I and Tier II – telling you in terms of their hiring plans for the year? Is there even a hint of lower hiring numbers as a result of the economic slowdown and tightening IT budgets in the US?

The IT industry has been slow pedaling since the last couple of quarters though they would not want to admit that they are hiring lower numbers. As of now, they are going thru the process of interviewing-essentially with an eye for great talent. Naturally the number of offers have dropped- and quite a few are on hold-as companies aren’t ‘hoarding’ as earlier!

Have your IT recruitments – in terms of numbers – started to see any downward trend in the last few months as compared to the previous year?

Personally, we at Options haven’t seen the numbers coming down-since we are really very marginal players-and at our base-we aren’t impacted with either the ‘boom or the bust’!

Our clients have been filling in critical positions-and we play a more ‘value added role’ this year-not just being content on ‘filling in the numbers’.

At what level is this downtrend expected to be felt the most – junior, mid or senior – and why?

I think it would be the middle management level that would be hit badly-as most entry level and junior level positions are cost effective. Especially in a market now –one can spend a decent time training new comers-and preparing them to ‘hit the ground running’ when the market picks up.

Senior management hiring would continue to be strategic-and companies would expect the candidates –who can ‘mine’ into clients and get as much business as possible, once they have a foot in the door’.

Do you feel there any specific skill sets where this downtrend is most likely to be visible?

Let me flip it around. Those with good technical skills AND functional knowledge with ability to manage clients-would be in high demand. In 2007 a pure java programmer may have been lapped up- but today he would need to have a decent exposure to the functional domain –and extremely good communication skills to make the grade.

At the moment, it only seems that the BFSI segment is affected-due to the US sub prime. The other verticals like manufacturing, utilities etc-all seem to announcing projects as per plan/expectations.

There is a lot of apprehension among graduating students in engineering colleges about their placements and salaries this year. How real are their fears?

Yes, I think the honeymoon is definitely going to be over. In any case most engineering students were ‘learning all the job skills’ after being recruited. Now that the companies have the luxury of time with them to prepare such talent, they may not pay the premium they have –in the last couple of years at campuses to attract talent.

Companies have the opportunity to bring down their costs of hiring-and training-and so one would surely see a more rationalized hiring in place. Surely the entry level salaries would not beat the inflation rate!

Do you believe that in a rush to grow their business in the last few years Indian IT services firms were somewhat lax in their quality of recruitments? And is this something that is coming back to haunt them now?

The IT industry now has the time to review their hiring process-and training. The pace of acquiring business was faster than building the talent pipeline and so the companies were forced to pay a premium for good talent-as they had the pressure of delivery.

This is a great time for companies to take stock of the quality of manpower-and so will use the opportunity to gear up for the immediate future. Its time comp

Are these IT companies now looking at tightening their recruitment processes? How will this affect all the stakeholders in the game – engineering students, executive search firms like yourself and the company itself

The tightening of recruitment processes will differentiate the men from the boys. Only a firm- or person-who can add value to all processes around-can sustain in future.

Its time that recruitment firms become an extended arm as partners to corporates-rather than vendors- and see one can go beyond just recruitment. Those with an eye on talent acquisition, talent management- and better on boarding processes, would succeed better in future.

What is your sense of the IT job market in 2008 – are things going to get worse or are you still optimistic?

2008 isn't likely to be great –though I can see a very robust 2009 ;-)!

The slow down in IT business is more on a cautious note at this stage. Yes, thanks to the sub prime, the financial services in US have been hit badly-and a lot of European companies are yet to take a call entirely truthfully.It is only the financial services companies that are being affected now-as most of them have gone back to the drawing board-and doing a lot of restructuring.Quite a few layoffs have been announced-and more to follow. The consequent uncertainty has put decision making on a hold for a while-and I think its only by Aug/Sept 08 -that things would be clear about the next years IT budget. As of now, it only seems to be postponed-not cancelled.In that perspective-IT companies depending on the BFSI segment are having to spend some uncertain times-while all other segments are not too affected.
But the bottom that most companies in the West have had a top heavy organisation-and off shoring is the only way out for them-once they restructure-and so it is definitely going to be good news from Indian industry :-)!

I shall be glad to have your views, opinions and perspectives! What are companies telling you in terms of their hiring plans - at the junior, mid and senior level? Is temping going to be the biggest casualty here? Will this also impact the flow of techie NRIs back to India?


Anand Reddy said...

Its a good article. But could you let us know how Indian Industry will be benefited with this ? Though outsourcing is the most obvious answer, but will this truly happen?
Recently XYZ company gave offer letter to final year students and now its saying it want them to take one more test which will be held across the state? Is this the sign of Slowdown on Indian IT-industry?

Achyut Menon said...

Anand,Indian IT industry will have to add value -and the cost arbitrage will only be only one aspect!

In future, the better and succesful companies will have to focus on different drivers -like

-leveraging technology expertise

-improving customer value

-gaining competitive advantage

-overcome lack of in-house resources, and

-increase shareholder value /flexibility.

Outsourcing is just another tool- and the the whole game is actually 'transformation innovatively'!!

PS-yes, if only the fittest of companies can survive, they will have the raise the bar for hiring their team who could help them win the battles out there in the market.Like candidates dropping out after picking up offers, would you put it beyond corporates to renege on their's?

Unknown said...

Hi Achyut Menon...
Greetings ! Its a good article..
Realy the damage happened to BFSI industry is worst n infact IT companies which works in BFSI are also victims to this trend..
So the Trend has changed now & Honey moon is over, Obivosly the HR(Recruiting)dept. will face the heat when hiring is less. As i beinging a Recruitment Executive (2 yrs) Pls suggest me,How to handle this impact wht shall i inculcate to be value addition to our company as well to client..
Awaitng for your reply.
(Pls answer me with respective of Recruiter in Consulting Firm & Coorporate too)

Unknown said...
This comment has been removed by the author.
Unknown said...

...Good article!!! w.r.t last question...job scenario in 2009 looks robust; I came across a website with a different perspective towards business... (a green job portal)... I was impressed...

Anonymous said...

You know that you can analyze from an astrological perspective as well.