It's cease-hire for Indian IT firms

By agencies   |   Thursday, 18 August 2005, 07:00 Hrs
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NEW DELHI: The hiring spree of the IT majors and their BPO outfits has slowed down. An analysis of employee additions by 10 top IT services firms, including Infosys, TCS, Wipro and Satyam, shows that the average rate of growth of new hiring has declined to 34.7 percent in Q1FY06 from 37.5 percent in Q1FY05. And that’s not all. The growth rate of employee additions in the quarter gone by is the lowest in the last five quarters.

The slowdown is more dramatic in the BPO space, where the rate of growth of employee additions in BPOs such as HCLT BPO, MsourcE, Progeon, Nipuna, and Wipro BPO came down to 37.4percent in Q1FY06 from 81.6percent in Q1FY05, business daily The Economic Times has reported.

Analysts say that this phenomenon can be explained by the gradual deceleration in volumes that IT services companies are witnessing compared to the blockbuster 12 months most of these companies had last year, when deals flowed as clients took to recruitment in a big way. “Business volume growth has been disappointing for the bigger companies.

As compared to last year, when most companies registered robust double digit growth in most quarters, this year, most companies have clocked single digit growth with the exception of Satyam,” says a leading IT analyst. This slowdown is also evident in the revenue numbers posted in the quarter ended June by IT services firms.

On the BPO front, analysts say the slowdown in employee addition is direct fallout of declining “Voice” business. “The problem in BPO is said to be the voice business which is becoming more and more difficult to handle, and that is affecting business traction,” says another analyst.

According to the Morgan Stanley analysis, employee addition in the IT services business had peaked in the quarter ended September 2004 with a growth rate of 45percent. Since then, the growth rate came down to 40.2percent in October-December, 38percent in January-March and finally touched 34.8percent in the last quarter.

Individual companies show a similar trend. Take the case of Infosys. The quarter ended September 2004 saw 58.3percent growth in new hiring, subsequent two quarters clocked 45.8percent and 40.2percent growth, respectively, and the last quarter saw employee addition growth down to 36.6 percent, the paper reported.

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