Hiring slows at IT services firms in India because of economy

Nasscom trade group cuts its hiring forecast, now sees 20% decrease from last fiscal year

India's IT services and call center industries are likely to hire tens of thousands fewer workers than expected during the fiscal year that began in April, according to the country's top technology trade group.

Ganesh Natarajan, chairman of the National Association of Software and Service Companies (Nasscom), said today that the group now expects IT services companies and call center operators to hire about 200,000 people by next March, instead of the 276,000 that it originally projected. The revised figure — which includes expected hiring by India-based companies as well as the subsidiaries of multinational businesses — represents a 20% decrease from the 250,000 new hires recorded by Nasscom for the previous fiscal year.

The hiring slowdown reflects reduced profits and revenue-growth forecasts at some of India's major outsourcing vendors as a result of the global economic crisis, Natarajan said. He added that services firms are also boosting their staff utilization rates and reducing their so-called benches of idle workers who are kept on standby in case client needs suddenly increase.

In addition, India's outsourcing industry has privately voiced some jitters about Sen. Barack Obama's victory in the U.S. presidential election, fearing that he could adopt policies designed to deter the offshoring of IT work. On the other hand, the ongoing economic turmoil is expected to drive more U.S. companies to look to offshore moves as a way to cut costs.

In July, Nasscom forecast a growth rate of 21% to 24% for software and services revenue in India during the current fiscal year, compared with a 28% increase a year ago. Natarajan said the trade group plans to review its revenue growth targets next month, by which time there should be an indication of how the IT services and call center industries will perform in the last quarter of the fiscal year.

But he added that the economic crisis is getting worse and that the business slowdown is likely to last another 12 to 15 months. New application development work is expected to be affected the most, according to Natarajan, who also said that smaller services providers looking for funding have been hurt by the tight credit market.

The major outsourcing vendors in India are continuing to expand their facilities and increase their workforces in the expectation of revenue growth, even if the growth they're seeing is slower than that of previous years, Natarajan said.

Copyright © 2008 IDG Communications, Inc.

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