An interesting article appeared in LiveMint which reported that Indian IT industry is now generating $1 billion additional revenue from a workforce addition of just 19,783. This figure proves that Indian IT industry has started getting high value projects which need fewer resources. This was not the trend till 2003. IT companies could think of generating revenue only in direct proportion to the increase in workforce and resource strength. It even led to the concept of ‘work benches’ where an extra bunch of employees will be hired more than what is required so that firm can start looking at more clients and projects.
Many IT firms were turning themselves to ‘body shops’ too who just offered resources working on a simple operating principle of ‘more the resources deployed more the revenue’. However, the trend seems to be reversing as reflected by this increase in resources Vs additional revenue generated figures in 2003 and 2011-2012.
- In 2003 – TCS [stock quote] and Infosys needed additional 37,798 engineers to make $1 billion additional revenue
- In 2011-2012 – Total industry needed only 19, 783 people to make the same billion dollar additional revenue
- Over the last 4 years, total software exports grow by 12% as against 9% growth in the number of new employees
This summarizes the growing trend of Indian IT majors moving up the services value chain. They have been successful in winning high value strategic projects which need domain expertise and consultancy skills than just operational resource intensive back end tasks.
Visible trends in the Indian IT sector which has contributed to higher incremental revenue from resources are:
- The nature of outsourcing jobs are moving away from low end voice based back office tasks to high-paying strategic front end activities. Indian IT vendors are slowly transforming as business partners than a mere service provider.
- Clients are now paying more with respect to the business outcomes and not on the basis of just the manual effort required. Pay is not linked to volume of effort and workers, but more to the quality of work and impact it delivers on client business
- Companies are now focusing on services and platforms which will ensure higher incremental revenue generation without adding any more human resources. Though this could reduce the employment opportunities it could lead to better job stability and pay outs thus improving the working environment and quality of labour.
- Firms are coming up which depend more on technology and humanoids than human resources to make life better for clients. IPSoft is an example which generates around $1 billion revenue with less than 2000 employees. Humanoids can perform the tasks at one-fourth of billing rate of the engineers.
These trends however, throw some serious concerns on the millions of fresh graduates and youngsters who are looking to make a career in IT. For example, Infosys [stock quote] reported 35% decline in the proportion of engineers with less than 3 years of experience. NASSCOM wants to view this still optimistically saying that this non-linear investment trends and moving up of IT firms in value chain will open up more opportunities for skilled people. Hence people with rights skills will always have their demand in the new IT industry landscape which is shaping up.