Steep fall in demand for engineers in IT industry

These are hard times for engineering graduates. In happier days, they saw their seniors in college being mopped by India's $100 billion IT industry at fancy salaries. But they are unlikely to have the same career trajectory.

There are indications that salaries, from now on, will be more modest and many fresh engineers will be lucky to find employment.

Seats in engineering colleges have risen at a rapid pace over the last decade. Gradually, supply has begun exceeding demand.

Even in 2004, a report by Kotak Institutional Equities estimated the country's technically qualified talent output at 273,342 annually while the industry's net employee addition per year was 160,000.

By 2013, the talent output stands at 1,072,800 while the net addition is just 188,000. So the total talent output between 2004 and 2013 has jumped nearly 300 per cent.

Job opportunities, on the other hand, have fluctuated with the industry's fortunes - talent demand as a percentage of supply peaked at 75.6 per cent in 2007, when the outsourcing industry boomed and every Indian company went about increasing its market-share.

The percentage dipped to a low of 18.2 per cent in 2010, the recession year. In the last two years, talent demand as a percentage of supply has been hovering in the 17-26 per cent range.

Total talent output is expected to increase to 1,154,000 in 2014 while job additions will remain subdued given the broader changes in the IT industry landscape.

The Indian IT industry will have to hire more talent onsite rather than in India partly because of new regulations and also because of changes in their business mix. Growth areas such as analytics may require lateral hiring of experts rather than graduates.

Almost all top-tier companies are exploring Intellectual-Property based solutions and the industry has been automating its processes to reduce its dependence on people.

Very soon, double digit salary hikes could be a thing of the past.

But there is another scary thought.

While more supply than demand is a happy situation for IT companies, it is quite the reverse for engineering colleges, most of whom promise 100 per cent placement. Many colleges will have to close down and corruption in recruitments - of the sort Business Today pointed out last year could peak.