Hyderabad IT faces headwinds

Hyderabad IT faces headwinds
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Highlights

With the first quarter of FY18 coming to an end, domestic IT industry more particularly the Hyderabad software industry is grappling with a gamut of challenges right from the trimming headcount to dealing with automation, reskilling existing manpower, adopting new technologies in more commercial way, etc.  

10-15 per cent drop likely in net hiring this year

Hyderabad: With the first quarter of FY18 coming to an end, domestic IT industry more particularly the Hyderabad software industry is grappling with a gamut of challenges right from the trimming headcount to dealing with automation, reskilling existing manpower, adopting new technologies in more commercial way, etc.

Considering these facts, reducing bench strength, shrinking new hiring and slower exports growth look certain, observe experts from Hyderabad software industry. The number of techies sitting on benches, waiting for new projects, is declining rapidly.

As a result, the duration of ‘benching’ is also hovering at 2 months as against 6-12 months. The IT companies in the city prefer to load with freshers to maintain buffer pool.

Going by the Nasscom’s latest prediction in declining new recruitments in the domestic IT industry, it’s estimated to be 10-15 percent drop in net hiring in Hyderabad software industry this fiscal.

The Hyderabad software industry generated 24,500 direct jobs in FY17 taking the total headcount to 4,31,890. The Hans India spoke to over a dozen IT companies in the city and almost all of them agreed on a fact that slowdown is inevitable this year albeit better than national average.

“Once IT companies start announcing first quarter results, we may get more realistic picture about how it’s going to be for this fiscal,” says a CEO from the industry.

“We are experiencing pressure on margins. Getting new projects is becoming difficult by the day. Everyone knows what happening in the US. The situation in the UK is also not encouraging. So, not only our company, but all the IT companies are engaged in reducing bench strength.

Sustaining previous growth rates may not be possible this year. Our focus is on how to make our staff more productive on latest technologies. On the other hand, automation is impacting in a more significant way. So new hiring will definitely come down,” a top official at a leading software exporting company, on a condition of anonymity, told The Hans India.

Recording an encouraging 13.85 percent growth rate, software exports from Telangana rose to Rs85,470 crore in FY17 from Rs77,000 cr in the previous financial year. IT exports growth of the state surpassed the national average growth rate of 9.85 percent.

Nasscom in its latest guidance for FY18, predicted slower growth rate of 7 per cent as against 8-10 per cent in FY17. Nasscom also predicted a drop in net hiring by 40,000 to 1.3 lakh this fiscal from 1.7lakh last fiscal. Taking the ongoing situation into consideration, IT experts forecast that sustaining 13.85 per cent growth rate is really a challenging task for Hyderabad software industry and may witness slower growth rate.

However, Hyderabad software industry with its inherited advantages may perform better than its peers. The software exports growth is also expected to be higher than the national average. More importantly, domestic IT companies yet to catch up new technologies on a full scale, while traditional business is being getting commoditised.

Another major reason is that software industry is highly concentrated in Hyderabad, observes Telangana Information Technology Association (TITA).

TITA president Sundeep Kumar Makhtala said: “Still IT development is Hyderabad centric and yet to expand to other parts of the state. Ghatkesar and other tier-II cities are still cheaper for the IT industry. Of course, air connectivity is also important.

Start-ups can witness a boost in tier-II and tier-III cities. Service-based companies generally prefer cities like Hyderabad. But, product companies should come up in tier-II cities.”

TITA sees better performance of software industry in Hyderabad when compared with other cities in the country. “What’s happening now is cyclical. After a bit of slowdown, again it’ll pick up the pace.

We’re optimistic about future growth of IT industry in Telangana as major reasons such as affordable space availability, which is better than Chennai and Bengaluru. Connectivity is better and Hyderabad has huge talent pool.

Reskilling is not a problem here as local engineers are very open to learn new technologies and update themselves from time to time. Other national factors are same for any city and so for Hyd.

We have no doubt that Hyderabad software exports growth rate will be higher than national average for this fiscal as well,” adds Makhtala.

Telangana state is targeting IT exports to the tune of Rs 1.2 lakh crore by 2020 with a compound growth rate of 16 percent. By 2020, over eight lakh people are expected to be employed in the software industry.

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