IT Job Market Buzzing again

Headhunters looking out for 30,000 lateral entries in top firms
IT majors are back to hiring experienced hands after an eight-month hiatus beginning January. Counting for the early signals from headhunters in Bangalore, Hyderabad and Chennai, tech shops may be looking out for up to 30,000 lateral entries, if not more, before this calendar runs out. Recruitment agencies say they have started getting mandates for hiring in small batches.

At least two recruitment firms that FC spoke to confirmed that IT companies had mandated lateral hiring of between 20,000 and 30,000 employees in the past one month alone, though they were unwilling to hazard a guess on how the numbers might stack up by the end of 2009. They said there were still uncertainties about hiring intentions of their clients.

In the boom years of 2006, 2007 and 2008, the IT/ITeS industry created up to 400,000 new jobs every year of which about 150,000 were lateral entries. And while the global recession set in September 2008, hiring continued right through December. It was only in January-August this year that hiring trickled down to just a few hundred.

Headhunters confide that most large Indian and foreign firms, including the likes of IBM and Accenture, are back to hiring. Infosys and TCS have about more lateral hirings from the October-December quarter. So are some of the mid-sized body shops Sotware engineers with 4-8 years experience are mostly in demand.

Kris Lakshmikanth, CEO of The Head Hunters India said even tier-II IT companies were scouting for experienced personnel. “Depending on the size of the companies, the number of vacancies is generally between 50-100.”

Infosys board member T V Mohandas Pai told Financial Chronicle that his company had increased the forecast of additional headcount for financial year 2010 to 20,000 from 18,000 because it wanted to recruit more experienced people. This was needed to balance out the company’s staff pyramid, 70 per cent of which rests on freshers.

A HR industry tracker, who did not want to be named, said Infosys and TCS were also looking for business and vertical heads with over 12 years experience.

Sudhakar Balakrishnan, CEO of Adecco India, said, “There is some buoyancy now in the lateral hiring market for IT companies. Companies, though keeping the final numbers under wraps, are definitely looking to hire laterally. With revenues going up and the environment stabilising, they feel that a lot of requirements would be coming up.’’

While declining to give definite growth numbers, T Muralidharan, CMD of Hyderabad-based TMI Group said, the mandates received by his agency for filling up vacancies at top software firms in the past month was equal to what he had got in the preceding five months.

E Balaji, CEO of Chennai-based Ma Foi Management Consultants, said while the signs were good, firms were basically opening up positions that they had frozen earlier. “We have to wait and see how this scenario will pan out in the future,” he added. His opinion was shared by Gautam Sinha, CEO of TVA Allegis, a specialty IT/ITeS

hiring firm. He said, “The situation has improved but we are still 3-6 months away from lateral hiring going up to the pre-economic crisis numbers. The pipeline is good but big hirings will depend on the market condition in the US in coming months.”

He also explained that right now the companies were looking for professionals with 4-8 years experience. The big numbers would come when firms start looking out for professionals with 2-4 years experience, he said.

Google to Buy Admob for $750 Million

Google is to pay $750 million to buy AdMob, a provider of advertising on mobile phones, the internet search leader announced Monday.

The deal is the third largest ever undertaken by Google and underscores the company's strategy of extending its online advertising dominance to the mobile web, where its Android smartphone operating system is becoming increasingly popular. Google said it expected antitrust regulatory review in the U.S. but not in Europe.

AdMob has a system that serves display ads on mobile phones and its purchase could give the still nascent market a powerful boost, analysts said.

"Google could have built this itself, but this gives them a head start," says mobile analyst Greg Sterling of Sterling Market Intelligence. "It will thrust Google into the forefront of mobile display ads."

"AdMob is a great Silicon Valley story," said Google in a blog posting to announce the deal. "We are looking forward to having them join the Google team and work with us on the future of mobile advertising."

TCS to hire local talent in US

To expand its U.S. operation, TCS (Tata Consultancy Services) plans to hire 1,000 local workers at its new facility near Cincinnati, Ohio, by the end of 2010, reports DNA.

The company opened a $20 million delivery and software development centre in Milford, Cincinnati in Ohio, in March last year - in a bid to win federal contracts and be closer to the headquarters of its U.S. clients. Suryakant, President of TCS North America said, "The Cincinnati region is a great place for U.S. to recruit local talent to meet the demands of our customers as they grow out of the downturn."

The ohio facility is also aimed at securing what some major Indian service providrs are chasing - defence and avionics work. TCS is reportedly in talks with Boeing and Lockheed Martin for defence and aerospace contracts. This work can only be done by American citizens or green card holders.

Recently, the company bagged projects related to unemployment insurance for the states of Nebraska, New Mexico and Mississippi. "The U.S. by far our largest market and the seven hills park facility in Ohio plays an integral role in our strategy of putting our customers first," said Suryakant.

Currently, TCS employs 15,000 people in the U.S. The company has been shipping quite a bit of work to U.S, ignoring India's popular IT hubs.

Mid Tier IT Companies eye local deals worth 2 Billion USD

Mumbai: As the big companies are chasing the lucrative domestic market, the mid tier technology firms like Patni Computer Systems and Hexaware are attempting to enter the market by jointly bidding with experienced bidders, reports The Economic Times.

The Indian government departments and other state owned firms will spend around $2 billion on IT during the next 12 months. Hexaware, MindTree and Patni are among the many mid-tier technology firms seeking to explore new business with an experienced partner.



For instance, Hexaware is pursuing some large deals as part of a consortium and several smaller ones on its own. Its strategy for the Indian market will be different from its strategy for overseas markets, said Hexaware's Vice Chairman and CEO, PR Chandrasekar.

"If we treat India as just another location for our services, it will not work. It will need fairly dedicated focus and some innovation on how we source talent and price our offerings. You also need to leverage your niche capabilities, especially if you are not one of the big players," said Chandrasekar, who was earlier with Wipro.

For putting better focus on the Indian market, companies such as Hexaware and Patni have recently formed focused business units. As Narendra Upasani heads Hexaware's India business, Deepak Khosla is responsible for growing Patni's revenues from the country.

Hexaware will work as part of a consortium because the large contracts in the government and public sector projects usually require the bidder to have a track record in executing similar projects.

Guru Malladi, a Partner at Ernst & Young said it will be challenging for mid tier technology firms to take on bigger rivals. "A Rs. 5,000 crore project, for example, can never be delivered by a single player. But I do see an element of challenge for mid-size players who have so far not operated in the domestic market. Large players have to sometimes rely on small players but they may not see value in mid-size players in terms of cost or efficiency arbitrage," said Malladi.

"Globally, this kind of scale is not available anywhere, even if it may not be the largest in revenues," said Jeya Kumar, CEO, Patni Computer.

Like Hexaware, Patni is also chasing contracts in the domestic market as part of a consortium. "With the kind of large deal sizes we are seeing, you have to have a multi-vendor strategy," added Kumar. Apart from the government, Hexaware will focus on sectors like travel and transport, insurance, hospitality and logistics, and technology offerings across sectors.

According to Malladi, the mid size players have to be more strategic in their outlook using their skills to enter the market. Hexaware, along with others like Patni and MindTree are turning towards India, drawn by the large opportunity and significant growth potential.

Entry Level Salaries Down by 20% in IT

Bangalore: One may boast of being employed in IT in the current scene, however they have to work twice as much for getting an interview and the annual salary is peanuts compared to earlier days. A worsening economic crisis, increased availability of skilled workers and lower demand for software services have brought down the entry-level salaries for IT professionals in the country by up to 20 percent, according to experts tracking the sector.


Every year, around 3,00,000 computer science and engineering graduates seek employment with hundreds of tech firms, including big names such as Tata Consultancy Services (TCS), Infosys and Wipro. This year, more than half of them were left unemployed because tech firms were already finding it tough to manage resources sitting on the bench, according to Economic Times.

"The entry-level salaries are down by at least 10-16 percent. Last year, a number of companies gave away offer letters but did not recruit. On top of that, there is a new pool of qualified professionals being churned out this year - all this has created an oversupply in the entry-level IT job market where salaries typically sway between Rs. 3 lakh per annum and Rs. 5 lakh on the higher side," said GC Jayaprakash, Principal Consultant of Stanton Chase International.

Until two years ago, almost all computer and engineering graduates were absorbed by India's outsourcing industry, comprising top tech firms such as TCS, Infosys, Wipro and many others. However, as customers delayed and shelved outsourcing projects, these tech firms also postponed campus hirings. Many students had to approach potential employers directly, since companies did not visit their campuses for placements. "We formed groups and toured companies, and agreed to settle at lower salaries because it's better to be employed at lower salary than having no job at all," said Srilekha Varma, who recently accepted a job offer from a Chennai-based IT firm specializing in banking software.

In a normal year, computer science graduates were offered entry-level salaries of Rs. 3.5-5 lakh. However, companies are now hiring freshers at Rs 1.7-3.5 lakh. However, human resources heads at tech firms, including Wipro, India's third-largest software exporter, say professionals have become more realistic about what they want from their employers. "I don't think salaries have come down, but the environment has indeed helped us in containing salary hikes," Pratik Kumar, Head of Human Resources at Wipro said.

But few companies have not forgotten the offers made. TCS said it would do new campus hiring in January 2010 and will honor all 24,000 offers made for financial year (FY09). "Around 1,800 graduates have joined us in second quarter (Q2) and another 8,000 will join in Q3, rest of the graduates will join based on the demand," a TCS spokeswoman said. Infosys said for FY10, it has made 20,000 campus offers and expects an 80 percent conversion rate i.e. 16,000 of these offers to join the company. "We are honoring all our hiring commitments," an Infosys spokeswoman said.

Patni Targets Acquisitions in US and Continental Europe

Bangalore: Patni is eyeing two acquisitions; one each in the U.S. and Continental Europe, and plans to close at least one transaction by November 2009. The company has been negotiating with both these companies for the past three months and possibly within the next few weeks, the term sheets are likely to be exchanged. A term-sheet refers to an agreement between two companies to pursue negotiations to conclude a potential M&A (Mergers and Acquisitions) transaction.


Multiple sources familiar with Patni's acquisition plans said that the company wants to cross the $1-billion mark in revenues through inorganic growth, and compete more effectively with TCS, Infosys and Wipro for large multi-year outsourcing contracts. An anonymous source said that Patni was chasing an enterprise resource planning (ERP) services firm in continental Europe with around $400 million in revenues, while the U.S. target with expertise in insurance solutions area is closer to $150 million in revenues. Banking and financial services industry (BFSI), which includes serving customers such as Guardian Life Insurance, is one of the fastest growing businesses for Patni.

In a telephonic interview to the Economic Times, Patni CEO Jeya Kumar said that the company was indeed pursuing acquisition opportunities for accessing newer markets and scaling up existing domain capabilities. "We would either acquire a company for its pure IP within a particular domain, or for gaining access to a growing market."

According to U.S. based financial analyst, Patni should have around $400 million in cash by the end of 2009. Kumar, who joined Patni in February earlier this year, has been working on transforming Patni's internal processes. Experts such as James Friedman of Susquehanna International Group (SIG) said that the company has already moved in sync with tier-I suppliers by improving its operating margins from around 11 percent last year to almost 17.5 percent during the second quarter ended June this year.

"Patni has accomplished these goals through a combination of cost-cutting initiatives, including headcount reductions, travel controls, onsite/offshore adjustments, and utilization efficiencies. More surprisingly, the company has managed to grow again, with revenues increasing 3.5 percent quarter-over-quarter (QOQ)" said Friedman.

HP To Cut Loose its BPO Business

A recent Channel Insider article raised the concern that HP might sell off or shutter some of its outsourcing business. Specifically, the article speculated on the BPO operations that EDS brought into the firm as part of HP’s acquisition of EDS. BPO, business process outsourcing, describes the outsourcing of entire business processes, like accounts payable, to a third party with the objective of reducing costs and/or improving the performance/outcomes of those processes.

HP bought EDS back in May this year. Selling off assets, like the BPO practice, would seem like something that would have been done earlier than now. But, HP may not be happy with the lower returns that BPO offers. That was certainly one scenario that Channel Insider offered up.

(Fellow blogger Dennis Howlett offered up an assessment of the HP EDS merger here).

Why do companies decide to get out of recently acquired businesses? They do so because:

- the businesses do not ‘fit’ their strategic game plan
- the businesses are not healthy
- the businesses cannot return the margins that the company’s shareholders demand
- the economics of that business are really messed up by competitors’ pricing
- they do not understand that space or how to operate it well
- etc.

BPO is about scale and process delivery. The more scale, theoretically, the lower the operating costs. The better designed the processes, theoretically, the lower the operating costs and improved service levels for customers. However, BPO in practice doesn’t work the same as in theory. BPO deals often include a lot of one-off processing. Few ‘best practices’ or ‘best processes’ work well across industries or work well for every company. Too often, BPO solutions are not standardized and hence more expensive to operate than in theory. I suspect that most BPO solutions look more (and are sold more) like hosted applications than the standardized, multi-tenant applications offered by SaaS (software as a service) vendors.

Another issue with BPO deals concerns the ability of the outsourcer to dramatically improve existing processes and performance levels. Some deals essentially involve the transfer of systems to another firm. No step change in improvement occurs. Other deals promise a transition to new level of performance via new systems and process designs. These deals are expensive to implement as the change management, user training, and other costs drive up the BPO cutover costs for the user firm and the outsourcer. Finally, BPO providers who promise ‘continuous’ process improvements may find that getting a customer to one step change is expensive enough. Future improvements may be too costly to justify.

BPO providers also build their business on the use of third party ERP software. Guess what, those same BPO providers better have terrific pricing with those firms as license, maintenance and support costs for these products have been growing faster than inflation, consumer price index or reason.

But the use of ERP software may not be such a great thing for these BPO firms. If every BPO provider uses the same limited set of solutions with their limited (1980s) functionality, these solutions are not innovative or delivering unique value. This is especially true for back office (i.e., accounting and HR) applications. ERP and innovation are not words often found in the same sentence. Without innovation, value is hard to deliver.

BPO doesn’t have to be a low margin business, though. If outsourcers want to get higher margins, they need to offer something more than a commodity offering. Specifically, they need to offer innovation and value. The value must be more than low cost/pricing. Innovation must be more than process designs. BPO without innovation is a commodity. Without innovation, BPO is like any other business service: janitorial, vending, delivery services, etc.

If HP can spin off this business without taking a bath, they should use the funds to re-invent BPO. BPO today should be a service offered via a SaaS solution running with a PaaS (platform as a service) in a full multi-tenant world. BPO needs to fully embrace the cloud.

BPO-based processes need a huge infusion of innovation and it won’t be coming from the usual ERP suspects. Most of these firms have become large technology portfolio managers more interested in 43% operating margins on their maintenance base than in delivering something really new or different. These ERP firms are too vested in maintaining the status quo and not in delivering something really amazing. Their inattention to innovation is hurting BPO. Maybe, this is why HP is possibly running away from BPO….

HP Warns on IT Budges

Those expecting a return to pre-recessionary ordering patterns from data centre customers might have to wait slightly longer than they were expecting.

A warning was sounded by Iain Stephen, vice president of enterprise server and StorageWorks (ESS) UK and Ireland at Hewlett-Packard, as the vendor updated its blade and networking portfolio.


“I haven’t met a CIO or IT director that thinks their budget is going up in 2010,” he added “It is looking as if it is going to be as tough [as this year in terms of getting budget].”

As a result he said users would continue to look for cost savings by reducing running and maintenance costs.

But Stephen warned that delaying investment was not a decision customers could necessarily keep making as the existing infrastructure was aging and unable to cope with the increased demands.

“Most infrastructures were designed a long time ago, from two to ten years,” he said.