HCL Technologies’ recent deal with US based Merck Sharp and Dohme (MSD) is a signal that the IT sector has been awaiting.  The $500 million deal with the drug manufacturer suggests the return of big ticket deals (contracts in excess of $100 million) in the Indian IT sector.  Large deals such as this had been missing from the sector in the recent past.

Recent contracts won by other Indian IT companies suggest that the sector might finally experience signs of recovery. The HCL deal continues the trend of large deals that IT companies such as TCS, Wipro and Infosys have signed. With more companies looking at the flexibility and pricing of Indian providers, deals worth $100 -200 million are expected to increase. Wipro, for example, won four $100 million deals in the last few months.

Recent contracts won by Indian IT companies

TCS

• Signed a $900 million contract with Britain’s Personal Accounts Delivery Authority in March
• Won a  $230 million business from the Cardiff council in November

Infosys

• Won two contracts worth $150 million each in the fourth quarter.
• Signed a $100-million contract to manage the internal systems of Microsoft in partnership with US-based Unisys Corp.

Mahindra Satyam

• Signed and agreement with chemical company BASF

Patni Computer Systems

• Won a deal worth $200 million with Universal American – a US-based health insurance provider

With many contracts completing this year, many Indian IT companies will be in the fray, to compete with the likes of IBM, HP and Accenture. Wipro and Tech Mahindra, for example, are in talks with New Zealand’s Telecom Corp for the possibility of signing a contract worth $1 billion. New contracts and extensions on existing contracts will lead to many Indian IT companies on the threshold of another period of growth. However, the lull that existed in the sector has seen ramifications on the industry’s human capital.

Retaining and nurturing the IT talent pool

The economic slowdown led to most companies undergoing a phase of wariness and caution. This caution was reflected in the number of employees the IT/BPO sector hired during the period of 2008 – 2010.  FY10 saw the lowest hiring in the last few years. The National Association of Software and Services Companies (NASSCOM) expects the sector to touch 1,50,000 hires for the FY11 – a 75% increase since the previous year.

  Source: NASSCOM

The projected hiring figures hinge on the ongoing attrition rates and the anticipation of more business. It is debated that due to the industry’s return to form, it will see greater attrition rates compared to the last 2 years. Infosys, for example, hired 27,000 people during 2009-2010 which resulted in only 8,900 people being added to their payrolls.

Considering that Indian IT companies are adopting a cautious approach to scaling up this year, the focus has been on retention.  Many IT companies have already announced pay hikes for their employees. TCS announced a 13% hike in salaries and expects it to translate as $193 million more spent on salaries. Wipro announced an 8% hike in salaries and Infosys a 14% hike for employees working in India. Companies expect such measures in addition to promotions and variable pay as a motivation for employees to stay.  

Hiring for the year, cautious though it may be, will allow companies to meet new business needs. The focus remains on hiring freshers to meet current and future business requirements. HCL, for example, is planning to hire 5000 freshers this year. Infosys, on the other hand, is looking to hire 19,000 employees from campuses. TCS is looking to recruit 30,000 campus recruits this year.

It is expected that IT industry growth will pick up as the economic climate recovers. However, with many markets still recovering slowly, the key is to stay optimistic, albeit in an agile and cautious manner.