Indian IT firms are beginning to rebuild part of their bench as they
look to prepare for a digital wave that is seeing smaller deal sizes,
making it harder to grow at the same pace and profitability during the
technologies transition.
For years, IT companies have been cutting down on bench to boost operational efficiency and get a margin boost. But as they need to train people for digital operations, some companies are bringing the bench back. "We will need a little bit of a bench for digital," TK Kurien, chief executive of Wipro, has said. It plans to train 10,000 on digital technologies next month.
Even Tata Consultancy Services, the largest player in the Indian IT services industry, said it was raising its hiring target to 75,000 for the year, and hoped to exceed its goal of training 100,000 employees on digital technologies in FY16.
"The reason for raising the hiring target for the year is to be able to have a little bit of a bench," N Chandrasekaran, CEO of TCS, said on October 13.
Indian IT companies have big plans to boost in-house training because experts say the industry lacks enough people to win and service digital contracts. "If you look at the results for the last few quarters, you will see payments to third-party consultants have been increasing. Companies have acknowledged that they cannot control this cost until they have the talent in-house," an analyst with a Mumbai-brokerage.
All of this is coming at a cost. The National Association for Software and Services Industries expects companies spend more on training now than 1-2% of total costs they used to incur. Fees paid to external consultants rose 15% year-over-year to $330.2 million at TCS, far outpacing revenue growth in the period. Infosys' costs for technical sub-contractors rose 55% year-over-year to $131 million.
Even follow-on business from digital offerings is not likely to be as large as for other service offerings, given the size of initial contract. "They are going to have to pedal 5-10 times as fast to generate the size of revenue streams that used to keep Wipro and peers growing at the sorts of rates they fondly remember from yesteryear!" Anthony Miller, analyst with UK-based TechMarketView, said in a note.
"The shift we are trying to see is from services being consumed or being bought as competency-based capability (time and material) and maybe fast forward 3-5 years it will move to outcome. So, we (are looking to) move from capability to output and outcome," Anant Gupta, chief executive of HCL Technologies, told.
For years, IT companies have been cutting down on bench to boost operational efficiency and get a margin boost. But as they need to train people for digital operations, some companies are bringing the bench back. "We will need a little bit of a bench for digital," TK Kurien, chief executive of Wipro, has said. It plans to train 10,000 on digital technologies next month.
Even Tata Consultancy Services, the largest player in the Indian IT services industry, said it was raising its hiring target to 75,000 for the year, and hoped to exceed its goal of training 100,000 employees on digital technologies in FY16.
"The reason for raising the hiring target for the year is to be able to have a little bit of a bench," N Chandrasekaran, CEO of TCS, said on October 13.
Indian IT companies have big plans to boost in-house training because experts say the industry lacks enough people to win and service digital contracts. "If you look at the results for the last few quarters, you will see payments to third-party consultants have been increasing. Companies have acknowledged that they cannot control this cost until they have the talent in-house," an analyst with a Mumbai-brokerage.
All of this is coming at a cost. The National Association for Software and Services Industries expects companies spend more on training now than 1-2% of total costs they used to incur. Fees paid to external consultants rose 15% year-over-year to $330.2 million at TCS, far outpacing revenue growth in the period. Infosys' costs for technical sub-contractors rose 55% year-over-year to $131 million.
Even follow-on business from digital offerings is not likely to be as large as for other service offerings, given the size of initial contract. "They are going to have to pedal 5-10 times as fast to generate the size of revenue streams that used to keep Wipro and peers growing at the sorts of rates they fondly remember from yesteryear!" Anthony Miller, analyst with UK-based TechMarketView, said in a note.
"The shift we are trying to see is from services being consumed or being bought as competency-based capability (time and material) and maybe fast forward 3-5 years it will move to outcome. So, we (are looking to) move from capability to output and outcome," Anant Gupta, chief executive of HCL Technologies, told.
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