The lure of attractive salaries, quick promotions, foreign posting and job mobility attracted lakhs of young students to India's top outsourcers, making India the back office of the global IT requirements.
Some of those charms faded over the last few years as the global economy saw sustained slowdown, but more recently, India's big outsourcers have bounced back as global demand picked up. What's missing, however, is the usual exuberance among employees associated with a change in environment.
"This time the usual acceleration in wage pressure that accompanies improving demand seems absent... We note the bargaining power of companies with respect to entry-level employees is at its peak with real wages at their lowest in more than 15 years," Credit Suisse said in a report.
The global investment bank conducted a detailed research on employment and salary patterns of Tata Consultancy Services (TCS) employees and concluded that the average wage hike (7 per cent) for offshore employees in 2013-14 was at multi-year low. TCS is India's biggest outsourcer with nearly 3 lakh employess.
Entry-level salaries at TCS (adjusted for inflation) are at the lowest in 15 years, Credit Suisse found. In 1996-97, a TCS fresher was offered an entry-level salary of Rs. 1.45 lakh. This year the entry-level salary rose to Rs. 3.16 lakh, but adjusted for inflation, that amount is equivalent to a mere 1.15 lakh.
Here's what putting pressure on salaries and hiring.
1) Capacity of engineering colleges in 2013-14 rose to a whopping15 lakh as against 6 lakh in 2006-07.
2) India is projected to grow at the slowest pace in over a decade in 2013-14. The sharp slowdown has meant reduced competition for engineering talent from other sectors, Credit Suisse says.
3) The fear of Immigration Bill and recent visa controversies has forced IT firms to hire more staff on client sites.
4) Changes in business model: Companies can improve utilisation because of increasing contribution from 'non-linear' models and some amount of automation, Credit Suisse says.
5) IT companies are increasingly turning to non-engineering graduates as the process of software development has become less complex in certain areas, Credit Suisse says.
A combination of these factors has led to a glut in number of graduates vying for software jobs. And unless the there's a sustained recovery in global and domestic economies, the much aspired job in Bangalore and Hyderabad could soon lose its charm.