With a strong surge in demand for IT services from abroad, Indian tech companies are going on a recruitment spree after a long dry spell. Most of the large IT companies like Infosys and Satyam are likely to significantly increase their recruitment of fresh engineers in the coming months.

Companies are recruiting new personnel following increased business due to strong client additions, the US recovery and rising offshore IT outsourcing. It is expected that most domestic IT companies should deliver over 30 per cent topline growth in FY2005. Also the increased proportion of freshers is likely help these companies control overall wage inflation and compete with their global counterparts. There is a rise in salaries for the employees of these companies. According sources, most companies have affected a 10-15 per cent salary increase for offshore employees and 3-5 per cent for onsite employees. Infosys had provided for about $23 million in FY04 towards performance bonus, which is a part of salary increase in FY05.

There is no shortage of skills at junior levels. But, strong volume growth and aggressive hiring by MNC IT companies would mean higher salary inflation at middle management levels. Companies are now trying to curtail wage inflation with a higher intake of freshers. Apart from this, Indian IT companies are known for their ability to train fresh engineers and quickly make them billable. IT companies had resorted to hiring laterals over the past two years due to the relatively easy availability of experienced skills and a slowdown in IT services.

What is heartening is that after a tough spell, most companies are finding that bill rates have stabilised.

However, a significant increase is unlikely in the near term due to intense competition. Some companies expect a marginal increase in average realisation due to the higher proportion of value added services.

There is also a strong demand from sectors like telecom for IT services.

Nasscom expects IT services and BPO exports to grow at 30-32 per cent in FY05. There is increased competition from MNC IT companies, which are aggressively setting up offshore development facilities. According to analysts with Enam Securities, the strengthening of the US dollar against the Indian rupee will help IT companies in a big way, as it would restrict the margin decline in Q1. Indian IT services companies are leveraging their existing (IT services) clients for winning BPO business. It is expected that BPO revenues will become sizeable for most Indian IT companies by next year.

While non-voice BPO services are growing at a higher pace, voice-based BPO services (75-80 per cent of current BPO exports) will continue to be a large portion of BPO exports in the medium term. Employee attrition is a key concern for most voice-based BPO firms.