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Cost-wary tech majors ramp up onsite hiring

Onsite hiring model could give Indian IT companies a competitive edge while cutting subcontracting costs.

Updated: Oct 28, 2019, 03.53 PM IST
Analysts said the Indian IT companies are seeing increased competition in digital technology-focused deals and that is fuelling a demand for talent onsite.
BENGALURU / MUMBAI: Indian technology services companies, including Infosys, TCS, Wipro and HCL Technologies, are ramping up hiring at their innovation hubs and offices onsite, to reduce subcontracting costs.

Infosys, which hired more than 10,000 people in the US and set up six key innovation hubs during the past couple of years, is trying to create a talent pyramid at its hubs. The software services exporter has also reduced dependence on H-1B visas significantly during the past two years. Infosys’ larger rival Tata Consultancy Services (TCS) is focusing on strategic hiring across geographies to contain higher subcontracting costs.

Wipro, which achieved nearly 68% localisation in the US, said it is “making significant investment in training and reskilling our workforce” onsite and continued campus hiring.

“So, the whole idea of the hub actually was, firstly to get the innovation labs around the hubs where clients can come. We can create a pyramid in the hubs as well, so one of the things was to get freshers, looking at the talent scarcity in the US — how do we take freshers from community colleges and build a pyramid? And, that is also helping our cost structure,” said Nilanjan Roy, chief financial officer, Infosys.

Another senior Infosys executive said that “the hubs there give us greater leeway...hiring is happening across ranks and contextual to business”. In a post-earnings conference, TCS CEO Rajesh Gopinathan said the company’s subcontracting costs had stabilised. Gopinathan said the company was trying to reduce the cost of hiring onsite and contingent labour and the strategy would bear fruit in the medium to long term. “We are steadily trying to attack (costs) by increasing our entry-level hiring in various local geographies, so that we can offset temporary lateral hires,” he said in a call with analysts recently.

In the second quarter ended September 30, TCS’ fees to external consultants stood at Rs 3,279 crore. It was Rs 3,194 crore in the previous quarter.

TCS said in its annual report that fees to ‘external consultants’ had increased to Rs 11,330 crore in March 2019, from Rs 8,992 crore in the corresponding period in 2018.

Analysts said the Indian IT companies are seeing increased competition in digital technology-focused deals and that is fuelling a demand for talent onsite. The hire-train-deploy model onsite could also give them a competitive edge, said Phil Fersht, CEO, HfS Research.

Peter Bendor-Samuel, CEO, Everest Group, said it might take as long as three years for the IT firms to completely build a talent base at the hubs, but they are seeing benefits “immediately”.
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