Tuesday, April 23, 2013

Freshers are neither threat nor solution

Wipro would mute fresher's hiring, HCL not hiring freshers this year, Infosys's 3.0 is built on new platforms and innovation. Freshers do not fit-in there, at least in start up phase of new technology. Freshers fit in when a technology becomes, 'mass product' or platform.
So, where will freshers go?
 TOI mentioned 5 lacs engineering graduates pass out each year in India. Half of them were ideally consumed by IT industry. Other estimates keep engineering grads passing each year in India to the tune of 10 lacs if not more.

Technology ideally phases out in 5 years now and by the time T schools catch up with Big Data, Cloud and Mobility, they will be obsolete and newer technologies will emerge.
It appears, brick and mortar modal of companies are gone. Now, it is tough for them to estimate and plan business and comprehend the ever changing face and direction of market.

Consumers of IT services and products are shrinking budget and automation is killing possibilities of demand.

Hiring of freshers have always been based on wind fall based demands. Now, demands are so unpredictable, how will company focus on supply side of resources and build them through Bootcamp, Crash courses to the level of client's and project's needs.

Lower utilization rate of Wipro of ~65%, Infosys, ~ 70% against minimum expectation of 85 to 90% is well below the expected level.
Assuming TCS has 260,000, Infosys has 150,000 employees and Wipro has around the same, 65% utilization would mean, ~150,000 employees in excess. Assuming, one shall keep 10% buffer against attrition, sudden demand, etc, they still have ~130,000 employees extra, which means at an average cost per employee being pegged @$44K, the total loss would be $ 5,72,00,000,000. Which is $ 5.72 bn per year.

Assuming, companies tried to save them from sinking shareholder's value and their survival, they lay-off 20% , which is 26,000 employees. Looking at first level of load-shedding, it is just 10% of TCS employee base, which looks like fine.
Will companies take this decision today or delay it?
They will delay it as conventionally, they have started the process in this direction but slightly differently.
They are doing the same by HIRING EMBARGO!
This hiring embargo is not new as Wipro, HCL, Infosys and other major IT players had started delaying joining dates for freshers from tier-2 T schools much earlier. It stated in 2009 that they did not confirm start date for several thousands across cities and colleges. This included colleges like NITs as well.

But this small sacrifices and cosmetic approach is not going to make these companies financially sexier.
They need re-structuring and major shake-up.
They need to identify their termites in their fortresses, which has got termite-ridden.
Freshers are not threat to them and just keeping them outside the fort will not save the ivory towers.
Tough decisions have to be taken! Delaying a cancer treatment makes it un-treat-able.

1 comment:

  1. Yes you are true by the time new recruit gets used to the new company especially freshers the technology would have changed hands with the new one, how do one plan for fresh talent induction when the technologies change in 3 to 4 years what should be the talent grooming planning and the education scheme for the rapid changing industry, earlier say 20 years ago companies had time to hire fresh talent and train him close to a year and the time invested would pay them huge dividends, people were prepared for long career of 25 to 30 years which is dropped to 15 to 20 years at the upper limit.

    Do the current IT companies have the luxury of time in their hands to train the fresh recruits?? yes there are some legacy people in the systems who needs to be shown the door every delay in taking the tough decision will cost the company dear!!!

    If the IT Industry is innovative we need people with ideas and newer/smarter ones to lead the Industry, not the old and tired ones like we have, who lack motivation in all aspects their only motivation is to hold on to the chair and the seat of power,make all people around to dance to their whims and fancies. There are always the set of people who do not want to work and are ready to do any kind of compromise, there are many cosmetic people in the industry who are not required, if their work is done by someone else they why waste company's resource cost saved by sacking cosmetic agents/artists will go a long way in cleansing the system and the Industry will be a better place to work and less frustrated people, lower attrition levels, excited workforce, lesser expectations as people are driven by goals and excellence rather then negative competition.

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