The $245-billion it services outsourcing industry, India’s largest white-collar recruiter, is one of the biggest success stories to emerge from India. It typically absorbs 20-25 per cent of the 1.5 million engineering graduates in India every year. However, the halo is fading lately among freshers of second-tier colleges, where the behemoths usually hire en masse.
“We see a decline in the number of students applying for these jobs over the past four years… The charm is fading for IT services companies,” says Vivekanandan M.S., Associate Director and Head of the Directorate of Corporate Relations and Career Services at SRM University (Andhra Pradesh). Hari Om Bansal, Unit Chief of Placements at BITS Pilani, says IT services firms were in vogue 8-10 years ago. “Now, IT product firms have taken over. They pay better, roles are more challenging and offer better exposure through foreign trips and students from premiere institutes prefer them,” he says, referring to firms likes Microsoft, Amazon, Flipkart, Cisco and Oracle.
Colleges attribute the trend to low entry-level salaries that have stagnated at Rs 3.5-4 lakh per annum (LPA) for over a decade, while the IT services industry’s exports have grown multi-fold. To attract youngsters with aspirations, several top IT companies have implemented differential hiring. For example, K.V. Sriram, Associate Director of Industry Liaison, Placement & Practice School at Manipal Institute of Technology, says that after receiving the initial offer, students can qualify for better pay and specialised roles within the same company. “This shows that IT services companies are trying to address students’ aspirations.”
“Apart from regular roles that pay Rs 3.5-4 LPA, the same companies offer a digital profile with a higher compensation of, say, Rs 7 LPA,” says SRM’s Vivekanandan, adding that there is some interest from students for niche roles focussed on machine learning and cybersecurity. “The maximum pay services firms offer is Rs 5-6 LPA, whereas product companies offer a minimum of Rs 14-15 LPA. The difference is stark even compared to the niche roles that offer, say, Rs 10 LPA,” says BITS Pilani’s Bansal, adding that the college is hosting just a few IT services firms and only for their niche roles for which two to three students get picked. Besides, SRM’s Vivekanandan says, product firms also hire in good numbers, referring to a financial product company that recruited 150 students last year from his college for a compensation of Rs 15 LPA.
Talent solutions firm Careernet CEO and Co-Founder Anshuman Das says IT services firms have to figure out their manpower demand planning in a better way given the low starting pay they offer, coupled with the onboarding delays faced freshers over the past year at least. “In the last 25 years, IT services companies have grown by maybe 2-2.5 times. Petrol prices have grown 4-5 times. But the starting salaries of freshers have remained at Rs 3.5 -4 lakh for the past decade at least. They have not increased even in line with inflation.”
“We have designed salaries tailored to each employee’s skill set and job relevance. The remuneration for freshers is determined by the skills they have demonstrated during the selection process,” says Harshvendra Soin, Global Chief People Officer and Head of Marketing at Tech Mahindra.
Students’ changing preferences have led many Tier II colleges to minimise their reliance on IT services companies. SRM’s Vivekanandan claims 150 high-paying product companies visit the campus in July-August with Rs 10-20 LPA compensation packages and finish hiring before services firms.
According to T.V. Mohandas Pai, Chairman of Aarin Capital and former Infosys CFO, more freshers from Tier III and IV colleges are joining IT services companies today because there is hardly any interest from Tier I colleges, while interest from Tier II colleges is waning.
“We have not discerned declining interest from freshers choosing IT jobs… Given the abundance of pool availability, we are not seeing any major impact on the supply side, but our focus is more on quality talent intake,” says Girish Nandimath, Global Head of Talent Acquisition & Academic Interface of TCS
To be sure, students still accept IT services job offers in large numbers. These firms hired 800,000 freshers over the past two financial years, per TeamLease Digital and industry estimates. But many accept them only as a backup until they bag higher-paying product jobs. Others join only to leave in a year or two once their market value rises following training. “The training given by software services companies is world-class. It pays to spend 1-1.5 years with them,” says Pai.