Even as Indian information technology ( IT) companies take heart from the improving conditions of the US economy, which could result in steady order flows, negative factors such as wage hike, lack of adequate and proper manpower and the appreciating rupee will weigh on their profits in the coming quarters.
Attrition has become a big worry for all big IT firms like Infosys, Wipro and TCS. This is despite the 20- 25 per cent increased spending that these IT behemoths have been undertaking to retain talent. According to Bhavtosh Vajpayee, IT analyst with CLSA, manpower cost accounts for 75- 80 per cent of the total cost of Indian technology companies.
"The general business outlook is very positive for the company. Yet, we are having a tough time retaining talent. Even when we give 15- 20 per cent increment, attrition remains a huge problem," a senior HR official at Infosys told Mail Today. "Moreover, the rising cost of living in the past three months has made the increment process useless as employees are still not satisfied. They are not completely wrong but then the company has limitations. Any further hike will put additional pressure on margins," the official added.
To beat the stubbornly high attrition rates, IT companies are aggressively hiring from college campuses. Last month, Infosys sent joining letters to about 20,000 graduates from approximately 1,100 colleges, with salaries starting from Rs 3.1 lakh to Rs 3.5 lakh per annum.
In a similar move, Wipro announced the hiring of about 8,000 fresh graduates from various campuses, including non-engineering students. They were offered 20 per cent higher salary compared to the previous year.
TCS has also begun wooing freshers similarly. It hired about 1,000 students from south Indian universities alone. IT firms have also relaxed the strict hiring criteria followed earlier.
For instance, Infosys announced the hiring of computer science Ph. D. students from IITs without interviewing them, to make the hiring process smooth. In this case too, the new salary offerings were 15- 20 per cent higher than earlier.
Most Indian IT firms are also hiring local US employees for their offshore offices. However, this has pitfalls, too. "The improving US market means hiring is going to be more expensive there," said an official at TCS. Earlier, during the slowdown, high unemployment had made the going easier for Indian IT companies as manpower came at a cheaper rate. "Now, it may see a rise," said the official.
"The outlook for the IT firms, especially the larger ones, looks positive in the short term. Volumes are growing. The US economy is shaping up better than expected," said Mahesh Patil, head of equities, domestic assets, at Birla Sun Life Asset Management.
According to analysts, apart from high wages, the appreciating Indian currency is a risk for the sector. The rupee firmed 0.6 per cent against the dollar during October- December, taking the rise in 2010 to 4.1 per cent.
According to Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services, "The longer term risk of the rupee strengthening still remains. Next year's outlook will be a little marred by the rupee."
Courtesy: Mail Today