It looks like adhering to escalation in costs, due to scarcity of enough talents and replacing temporary workers for permanent ones, there has been quite an inverse affect on the IT markets, especially the ones operating in the US, in FY 2020.
Not just that, once paying the highest to its employees, the IT sector and e-commerce sectors stand as the top paymasters in 2019 in a pool of 17 other sectors, even though there has been drops in salaries as compared to last year’s.
High-End Jobs Require High-End Talents
Indian IT giants like TCS and Infosys have recorded a significant number of deal closures in past some quarters. The delivery of these projects is expected to take off during this financial year. Parameters such as high attrition rate and rising sub-contracting costs are leading a reduction in the growth and profitability of this sector.
Infosys records a high attrition rate of 23.4%, while it was 20.4% in the Q4 of FY 2019. This rise is concerning and Infosys refers to it as ‘involuntary attrition’, risen up mainly due to the strengthening the sales team, setting up overseas development centres, sub-contracting expenses and recruitment in overseas locations, causing 320 basis points YoY decline in EBIT margin of Infosys.
On the other hand, even with the lowest attrition rate in the market, at 11.5%, TCS has shown the highest ever sub-contracting share of 8.4% of revenue. This is due to the cost pressures increasing due to local hiring and spends towards contractual staff in the US. Both the cos have been working hard to increase the local hiring in US by roping in local staff who command a higher salary package.
Enough Job Vacancies But not Enough Talent
IT and IT-enabled Services , along with e-commerce sector continue to remain the highest paying sectors of 2019, inspite of there being a reduction in salaries this year as compared to the last. The median salary increased by 10.95% in 2019, while this number was 11.45% in 2018. Even the Maximum salary growth recorded to be 15% among 9 sectors last year, this year being only 11.11%.
The top of the list, although was taken by the e-commerce sector with a 17% salary increment, which was 18.6% last year. The BPO and ITeS sector has estimated to create 2.93 lakh jobs between 2019 and 2023, which is quite challenging due to global market constraints.
The view looks good with the advent of automation and AI. There can be a lot of jobs created through these technologies. The situation has changed today, though. Unlike few years ago, IT companies no longer are interested in volumes. They require people with serious knowledge of technologies and is more focused on products.
This means that people should equip themselves with latest technologies. There was a high demand for data analysts, cyber-security experts and people with the knowledge of machine learning and artificial intelligence but there was not enough talent. With companies re-imaging their business models, people should change too.