· Indian Tech Industry market to be $230B to $240B in FY22 driven by growth amongst Top 15 to 20 Indian IT services firms plus robust GCC/Captive growth
· UnearthInsight estimates 19% - 21% Revenue Growth expected for FY22 highest for Indian IT services and this momentum is expected to continue in FY23/FY24
· Attrition in uptrend with 22.3% in Q3, which stood at 19.5% in last quarter and in Q4 it’s expected to be between 22 to 24%
As the 3rd wave of pandemic is subsiding and workplaces are expected to open completely in few weeks, the Indian IT industry continues to add a significant number of workforce backed by robust growth and revenues. UnearthInsight, a metrics benchmarking and market intelligence firm, today unveiled its report on “IT Industry Q3 Insights & FY22 Forecast”, an interesting set of analysis on hiring, attrition, revenues, salary hikes, emergence of new technologies and platforms for India’s IT Industry.
The report estimates freshers hiring of ~ 360,000 in the IT Services industry in FY22. The industry continues to witness an uptrend in attrition with 22.3% in Q3, which stood at 19.5% in last quarter and in Q4 it’s expected to be between 22% to 24%. However, from FY23 it is likely to improve and come down to 16%-18%.
On business aspects, Unearthinsight estimates 19%-21% revenue growth for FY22, highest ever for the Indian IT services industry, which is also expected to continue in FY 23 and 24. This year, notably Tier II firms are growing much faster on the back of pricing, agility, and partnerships. The Indian IT Services market is likely to reach $230B to $240B by FY22 which is largely driven by growth amongst the top 15 to 20 Indian IT services firms with robust GCC and captive industry growth. The report also reveals that:
· Total Contract Value (TCV) continues to show strength on back of the large digital transformation, platform implementation, product and cloud implementation deals across BFSI, retail, and healthcare clients.
· On net margins, it continued to decline sequentially by 60bp to 80bps primarily driven by salary hikes, new hires, increased sub-contracting costs as well as travel and facility costs.
· This quarter y-o-y margins also declined as talent availability continues to put pressure on hiring, retaining, and subcontracting costs volume witnessed from Q3 2021 to Q3 2022.
The UnearthInsight report estimates that 56%-57% employee costs/wage bill (Excluding contractors) across Tier I and Tier II players and this is expected to go up by 0.5%-1% in FY23.
Key Hiring trends:
UnearthInsight expects ~3,50,000-3,60,000 freshers to be added in FY22 by 30+ IT Services firms accounting for 14%-18% of the freshers in total headcount, therefore, aiding margin control, attrition control and growth both globally and in India.
Fresher Hiring | 9months Fresher Hiring Numbers (Q3FY22) | Fresher % headcount | FY22 Fresher Hiring target | Estimated FY22 Fresher % headcount (Target) |
TCS | 77000 | 14% | 105000(E) | 17-18% |
Infosys | 41250(E) | 14% | 55000 | 17-18% |
Wipro | 15000(E) | 7% | 17500 | 8-9% |
HCL | 15787 | 8% | 22000 | 9-10% |
Tech Mahindra | 10000 | 7% | NA | 8-9% |
Cognizant | N/A | N/A | 33000* | 9-10% |
Mphasis | N/A | N/A | 5500 | 13-14% |
Accenture | 35,000 | 5-6% | 16000(India) | 10% |
Capgemini | 30,000 | 6-8% | 19000(India) | 10% |
Mindtree | 2000-2500(Est) | 7-8% | 3500 | 8-9% |
LTI | 4000-4500(Est) | 8-9% | 5500 | 9-10% |
Note: cognizant hiring numbers are for January to December-2021
Top IT companies hiring freshers will be:
· TCS – 77000 freshers (105,000 is revised fresher hiring by TCS. Met FY22 hiring targets in Q3FY22 itself)
· Infosys – 41000-42000 freshers (Revised Target 55000 in FY22)
· Cognizant – 33,000 freshers (Revised Target of 50000 in FY22)
· HCL – 15,787 freshers (22,000 for FY22 and 30,000 for FY23)
· Capgemini India – 17,000 freshers (Revised Target of 19,000 in FY22)
· Tech M – 10,000 freshers added YTD
· Wipro – 14000-15,000 freshers (17500 for FY22 and 23000 for FY23)
· LTI – 4000-4500 freshers (Revised Target of 5,500 in FY22)
· Mindtree – 2,000 -2500 freshers for Mindtree (3500 for FY22)
· Mphasis – ~5,500 freshers Target for Mphasis in FY22
Indian IT industry is majorly focusing on hiring freshers. Millions of people have been employed by India's booming IT industry, which has also greatly increased the country's GDP. Hundreds of thousands of students now desire to work for massive IT firms every year.
Promotion and salaries insights:
To retain talent, companies announced a number of measures like salary increases, stock options, promotions, long-term incentives, higher skill increments, upskilling/reskilling training etc. These are being implemented across quarters and not together.
We can observe an 8-12% Average Wage Hikes by Tier I and Tier II IT Competitors along with ~15-20% of the employee promotions for retention.
Insights on attrition:
Attrition maintained its uptrend reaching 22.3% this quarter, up from 19.5% in the last quarter. This increase continues to be driven by the rising demand for new-age digital skills across industries.
Attrition remains a key challenge which companies continue to address on a priority. Companies continue to counter this trend through:
· Increased fresher hiring
· Wage Hikes/ Counter Offers
· Focusing on reskilling (Higher % wage hikes post deployment to new skill at 25% to 40%)
· Upskilling their current workforce
Insights around Key Technology evolution
Overall, the IT Industry firms are witnessing higher double digital revenue growth, primarily lead by growth of Cloud, Data & Analytics/AI, Product & Platforms and solutions like Low Code, No Code.
Cloud Driving Revenue Growth
In Q3, cloud practises in the Indian IT services firms grew by 20% to 30%, fuelled by next generation services such as ER&D, cloud, and data modernisation.
Within the cloud, AWS is the fastest growing product segment, followed by Azure and IBM Infra. At TCS, Infosys, Wipro, TechM and HCL practices like Cloudstrike, Snowflake, GCP, CLOUDNXT.NOW and Alibaba are emerging fast.
Product and Platforms are gaining traction among Indian IT services companies
Currently, Software Products & Platforms generate around $5 billion revenues for Indian IT services firms, wherein 90 % of revenue is coming from Southeast Asia, the United Arab Emirates, and the United States. TCS generates $3 billion in revenue from its platforms and products (P&P) segment, which accounts for 12%-15% of its total revenue.
Currently, the Industry Product & Platform business is not a separate unit and it continues to operate under numerous verticals. But, it is quickly establishing itself as a significant differentiator for India's large IT services provider by revenue.
Platform penetration of Low Code No Code platforms is increasing among IT services firms
IT services firms are expanding opportunities for Low Code No Code platform solutions, which are high in demand both in global and domestic market, with TCS Master Craft recording 24 wins during the December quarter.
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