Here's why India's IT sector is facing a talent war

High attrition rates recorded as tech employees in world's back office demand bigger salaries

India's IT industry employs 4.5 million people and accounts for 8 per cent of the country's GDP. Reuters

The IT sector in India, often known as the world’s back office, is facing a staffing crisis as the number of skilled people entering the workforce is failing to keep pace with demand.

It comes as the country continues to serve global corporates, while at the same time going through its own digital and tech start-up boom.

There's “this enormous requirement for IT job openings to be filled”, says Dhananjay Nagarkatti, the co-founder and chief operating officer at Innovsol Systems and Technologies, a digital consulting services firm based in Bengaluru, often referred to as India's answer to Silicon Valley.

But “the market of IT talents cannot meet the requirements of IT firms, both in terms of quantity and quality”.

“The biggest challenge in IT hiring is to find qualified candidates for the latest technologies,” he says.

India's IT industry employs 4.5 million people and accounts for 8 per cent of the country's gross domestic product, according to data from the government.

The total revenue of the IT-BPM (business process management) industry, excluding e-commerce, reached $194 billion in the financial year to the end of March 2021.

But, propelled by the rapid process of digitalisation taking place in India and worldwide, which has been accelerated by the pandemic, India's IT industry has the potential to achieve up to $350bn in annual revenue by 2025, according to a report by industry body Nasscom and global consulting firm McKinsey.

The projected growth is going to mean even greater demand for IT workers.

IT companies are already struggling to find the right talent, especially as tech start-ups have mushroomed across India. In the current financial year, the three biggest Indian IT companies — Infosys, TCS, and Wipro — are expected to offer 105,000 job opportunities, according to the India Brand Equity Foundation.

“There is a huge gap between talent demand and supply,” says Srividya Kannan, founder and director of digital solutions consultancy Avaali Solutions.

“This talent gap is even wider for critical and niche skills and is a cause of concern. The need for talent has grown significantly due to massive post-pandemic investments by enterprises in digital.”

Tejas Kulkarni, the co-founder of SheWork, which focuses on hiring for women in the tech sector, agrees that “we have seen increase in demand among companies in the IT sector in India … from start-ups to large corporates”.

This gap has led to the IT sector facing very high attrition rates, with employees demanding much higher salaries. Industry insiders say salaries have jumped by 50 to 100 per cent in some cases during the pandemic.

“The rising attrition rate is a warning sign,” says Shrishti Bhandari, executive director and chief marketing officer at Mangalam Information Technologies, which is hiring for positions including data miners, developers, and desktop and network engineers.

“Today, a prospective candidate seeks not only lucrative compensation but also flexibility and avenues for growth and continuous learning.

“Also, after releasing an offer, there are major chances that candidates take cross offers from other companies and do not join.”

When they do manage to find the right person for a role, companies have little option but to pay more.

“Finding and hiring the right skill set is a challenge and a concern for IT organisations,” says Sumit Kumar, vice president at TeamLease Skills University. “The pace of digital adoption and engagement has created an unprecedented demand for skills.”

Industry insiders say roles that are particularly hard to fill include developers, engineers and cloud architects.

Harish TR, chief human resources officer at Maveric Systems, says his tech company plans to hire 1,000 people within the next year, including software professionals, spread across the cities of Chennai, Bengaluru and Pune. But it is a daunting task in the current market.

“It is becoming increasingly difficult to hire as India continues to grow significantly,” says Mr Harish. “In addition to an influx of new players, the existing players are also growing and adding experienced professionals to their workforce. The same talent pool is being targeted by all potential employers and this adds to the hiring complexities.”

One of the main problems companies like Maveric face is that graduates often do not possess the skills required.

“The issue is that the graduate fresh hires are not job-ready and there is a fair bit of investment to be made on communication and technology skills,” says Mr Harish. “This needs to be addressed for managing growth better.”

The talent shortage comes even as unemployment levels have risen in India due to the impact of the Covid-19 pandemic and various curbs that were put in place over the past two years.

Even before the pandemic, unemployment levels were uncomfortably high in a country which has a large, young population, with millions of people entering the workforce each year.

Experts say that if India can ensure that more people are equipped with the skills needed by the IT industry, this issue can be at least partially addressed.

“India is growing as a digital economy but there is still a very large subset of the population that is not exposed to digital revolution or technology,” says Shankar Garg, Middle East and Africa managing director at IT consultancy Xebia.

“I strongly feel that if the government can introduce better programmes in government schools or incentives for private organisations to prepare underprivileged for the digital talent, then we can easily add 10 million skilled workforce in the next few years.”

If this can be achieved, it will help to lift many people out of poverty and boost the country's economic growth, Mr Garg says.

“Our university course curriculum should be updated both in terms of relevant and up-to-date content on the latest technologies,” says Ms Kannan. “Additionally, we should emphasise practical and hands-on knowledge to create a more relevant workforce.”

The Indian government is making efforts to improve the levels of digital skills through the National Skill Development Corporation, a public-private partnership, which is catalysing the creation of large, for-profit vocational institutions.

“We already have enough institutes for IT courses,” says Ms Bhandari. “The need of the hour is to focus on enhancing the employability quotient of these courses. There should be more stress on practical components of IT courses. Industry-academia collaborations will go a long way in upgrading the skill set of employees.”

Companies will also need to play a bigger role in helping to train India’s workforce.

“I strongly believe that the IT sector needs to invest heavily in apprenticeships, the academia connect, reskilling and upskilling of the workforce to lead digitalisation,” says TeamLease's Mr Kumar.

Amid the dearth of workers, some IT companies are coming up with initiatives to fill the expanding number of roles.

“Many major companies in India are opening bulk opportunities for fresher students as well as mid to senior-level posts,” says Piyush Akhouri, co-founder and business head at BridgenTech, a staffing and solutions company for the IT sector.

“Many of them are coming up with the ideas like a return-to-work or start again programmes. Some of them have even started hiring campaigns specially dedicated to women who want to restart their careers.”

He warns that India is being left behind in terms of skilling its youth amid rapid advancements in artificial intelligence, machine learning, robotics and other emerging technologies, and the country needs to catch up.

“It will become more challenging over the years for IT companies to find the right staff at the right time,” says Mr Akhouri.

Mr Kulkarni foresees the “talent war” growing in India's IT industry in the coming years.

“Technology is changing rapidly. Enterprises are demanding newer skill sets in employees,” he says.