IT firms adopt new ways to offset hiring costs

A slowdown in the global economy and sub-prime crisis in the banking, financial and insurance services sector, its major revenue earners, force the domestic IT industry to take a relook at its hiring strategy.

Domestic IT firms such as Zensar, Polaris and to some extent Infosys Technologies, are now adopting concepts like just-in-time for hiring process to offset hiring costs.

IT biggies such as Tata Consultancy Services, Infosys, Wipro and Satyam Computer Services' hiring numbers tapered a bit on a year-on-year basis. Meanwhile, mid-sized firms like Hexaware also deferred their hiring plans by nearly two quarters. Till date, the IT sector was known for hiring hundreds of employees every quarter. Stock analysts, too, evaluated domestic IT firms on this "growth" parameter.

Infosys, however, said that it would hire 10,000 less people in the financial year 2009, whereas TCS has changed its hiring mix in order to maintain costs.

"We have taken a long-term business view and announced a cut in hiring. But at any given time we are short of 50 people. For this year, we are looking at 15-20 per cent employees through just-in-time (JIT) hiring towards the third and fourth quarters," says Nandita Gurjar, vice-president and group head, Human Resources, Infosys. The company spends almost $170 million (Rs 746.8 crore) on training young professionals.

Meanwhile, TCS will focus on a hiring mix of freshers and laterals this year to be in the raio of 60:40, respectively. HR consultants also stand by this process, as JIT allows firms to cut cost, rather than having bench.

"The hiring trend in IT firms has moved from benching to JIT. Earlier the trend was to do a provisional hiring before a potential project comes through, however, that has not changed completely. Depending on the need, companies have shrunk their cycle time from the interview to actual offer stage," says Monisha Advani, managing director, Ranstand India, a human resource company.

One of the advantages of JIT strategy is reduction in costs as there is no bench involved. It also gives organisations better resources as they are billable from day one.

Zensar for instance, has adopted a talent-on-demand programme. The company has entered into a tie-up with over 20 campuses and provides training to students in their last year of an educational course. However, it does not necessarily hire all the students who get the training.

"Training for freshers takes more than nine months, they become billable only after that period. With the new mechanism, we can save cost as the deployment period is reduced from nine months to three months and we also have a reduced bench," said Prameela Kalive, vice-president and head, talent management, Zensar.

The company plans to hire 30 per cent freshers through its new strategy this year. For next financial year, the percentage will go up to 60 per cent and eventually to 80 per cent through JIT process.

"Just-in-time hiring is usually taken by the companies to reduce the bench and it depends on the project that the company is doing. For maintenance or activity enhancement type of a project, the JIT is small as compared to outsourced product development where the percentage is high. But overall, the big IT firms show a similar pattern of JIT which hovers about 15 per cent of the total," said Diptarup Chakravarti of Gartner.

In some cases, firms such as Sapient are focusing on lateral hiring only. The mid-cap firm plans to hire 1,500-1,800 this year and the freshers: lateral mix will be 15:85, respectively.

"Hiring has shifted gears in response to the global downturn. The cost of training freshers is five times more than the cost we will incur by hiring laterals. I prefer to hire laterals with higher salary," said Prashant Bhatnagar, director hiring, Sapient. In FY08, Sapient had hired 30 per cent freshers but this year it will hire only 15 per cent.

Advani believes the first impact of the revised hiring strategy is being felt by fresh graduates as they are not even being considered for jobs. Offers rolled out during campus hires have been put on hold or in some cases joining dates have been deferred indefinitely.