For years, fresh engineering graduates have had it good because demand from the IT industry was robust. That's changing. Salaries for fresh IT engineers will be under major pressure in the coming years.

"We believe fresher salaries of Rs 2.75 lakh to Rs 3.25 lakh will remain unchanged or be lowered over the next few years," wrote Kawaljeet Saluja and Rohit Chordia of brokerage firm Kotak Institutional Securities in a recent report.

The trend is changing because the number of students graduating in engineering has shot up in the past few years, and the demand has slowed. Estimates by IT industry body Nasscom show the number of engineers graduating each year has more than doubled to 8.13 lakh from 2007-08 to 2011-12.

In 2010-11 and 2011-12, the number rose by 25% and 31% year on year. During those years, the IT workforce rose by 10% and 9%. Most industry experts expect the workforce growth to slow down further, and the freshers will feel the impact. This is also because of the industry's move towards greater automation in traditional areas of IT, and the greater focus on high-margin businesses and new service lines like consulting, mobility, cloud and analytics.

Surabhi Mathur-Gandhi, senior VP (IT sourcing) in Teamlease Services, said there was up to 45% reduction in fresher hiring in the past two years as IT firms were remodelling business plans. "Hence, entry-level salaries have been rationalized. There is no scope for further reduction; it will remain flat, hovering between Rs 2.5 lakh and Rs 3.5 lakh," she said.



Ravi Shankar, chief people officer in Mindtree, said: "Clients are looking at more and more expertise which the freshers lack. This means a company cannot straightaway hire a fresher for a live project.

However, demand for 'quality' recruits remains high. This is because such students are expected to scale up to the 'expertise' the workplace demands without investing too much in training," he said. Other factors, too, are driving the demand down. IT companies are expanding to other low-cost locations such as Mexico, China and East Europe. They are recognizing the need to be closer to customers — most of whom are in the US and Europe — for building closer relationships and to overcome stringent visa regulations.

TCS has recruited over 5,000 non-Indians over the past four quarters. Infosys and Wipro have significantly stepped up hiring in other geographies. This week, Wipro announced it would hire 1,000 people in Germany in three years. All of this reduces demand for Indian engineering talent.

The adoption of outcome-based models is also putting pressure on IT companies to do more with less. Traditionally, IT service providers priced contracts on the time-and-material model where revenues are linked to headcount and time spent on software development.

Now, partly because of the difficult economic environment, more and more clients are demanding a return on every dollar spent, and want IT vendors to take some of the responsibility for the outcome of their solutions. "This is pushing service providers to pay attention to productivity over just 'billing' people. Therefore, companies must improve the quality of hires," said J A Chowdary, executive chairman of skill development company Talent-Sprint.

Source : TOI