Bloomberg News

Tata Consultancy Hires 70,000 Workers a Year as Demand Booms

June 15, 2011

(Updates with closing share prices in ninth and 10th paragraphs.)

June 15 (Bloomberg) -- Demand for Tata Consultancy Services Ltd.’s outsourcing services is so robust the information- technology company hired 70,000 workers last fiscal year and plans to add 60,000 more this year.

Tata Consultancy projects annual sales, which have quadrupled since 2005 to $8.4 billion, will increase 20 percent a year for the “foreseeable future.” That has it and Indian rivals Infosys Technologies Ltd. and Wipro Ltd. hustling to find hundreds of thousands of qualified candidates as global IT purchases grow 7.1 percent this year to $1.7 trillion.

Tata Consultancy’s expertise at using low-cost IT workers to replace more expensive labor in developed countries helped it land contracts with Deutsche Bank AG, Hilton Worldwide Inc. and Air Liquide SA last fiscal year. The company, Asia’s largest computer-services provider by market value, reported record annual income of $2 billion.

“As long as there’s growth, you don’t want to leave business on the table,” said Ajoyendra Mukherjee, Tata Consultancy’s vice president for human resources. “What we’re trying to do is make sure the supply chain is large enough to meet our growth requirements in the future.”

Microsoft, IBM Competition

Keeping the pipeline of talent filled is becoming more important as Microsoft Corp. and International Business Machines Corp. open facilities in India, and the local banking, finance and manufacturing industries hire their own computer engineers. Attrition at Tata Consultancy, Infosys and Wipro accelerated to its highest annual levels in the year ended March 31 as a post- recession surge gave workers chances to change jobs for raises of as much as 50 percent.

“The spike in attrition over the last four quarters is essentially because of the pent-up demand,” said Rajan Kohli, chief marketing officer at unit Wipro Technologies. “There wasn’t enough of a bench to fulfill that demand. People ended up hiring from each other.”

To stem the exodus, Mumbai-based Tata Consultancy will offer raises of 12 percent to 14 percent, the highest in three years, Mukherjee said April 21. Infosys is expected to boost salaries for domestic workers by 10 percent to 12 percent this fiscal year, Chief Operating Officer S. D. Shibulal said April 15.

The IT hiring spree is fueled by the expansion of Asia’s third-largest economy, which the International Monetary Fund said would grow by 8.2 percent this year after expanding 10.4 percent in the prior 12 months.

39 New Clients

The Bombay Stock Exchange Information Technology Index has advanced 13 percent in the last 12 months, compared with a 4.6 percent increase in India’s benchmark Sensitive Index. Tata Consultancy, the technology index’s best performer, advanced 52 percent in that period, while Infosys rose 3.3 percent.

Tata Consultancy fell 0.6 percent to 1,184.25 rupees at the 3:30 p.m. close of trading in Mumbai, compared with a 1 percent drop in the Sensex.

India’s $88.1 billion IT services and outsourcing industries were built by hiring cheap talent, mostly local, to write computer programs and maintain software for foreign companies looking to lower their own costs.

The industry now employs about 2.5 million people, according to a Feb. 15 report by the National Association of Software & Services Companies, or Nasscom, an industry lobby group.

Tata Consultancy had 198,614 workers on March 31, compared with about 41,000 six years earlier, according to annual reports. Last quarter, it added 39 clients, including Air Liquide, the world’s biggest producer of industrial gasses, and Royal Haskoning, an engineering and environmental consulting firm.

Deutsche Bank, Hilton

In the quarter ended Dec. 31, the company won orders from Deutsche Bank and Hilton Worldwide. Deutsche Bank said it would use Tata Consultancy’s banking-transaction platform in 30 countries. Hilton signed a multiyear deal to modernize its software.

The global IT market will grow 7.1 percent this year and 8.7 percent next year, according to a January report by Forrester Research Inc. in Cambridge, Massachusetts. India faces a shortage of 2 million qualified workers by 2020 because only about 26 percent of the annual 600,000 engineering graduates are considered immediately employable, according to Nasscom.

“The supply coming into the economy is great in terms of quantity, but not great in terms of quality,” said Hitesh Oberoi, chief executive officer of Info Edge India Ltd., which owns the website for jobseekers. “A lot of these people have to be trained again from scratch.”

China Expansions

That dearth of talent has spurred IT hiring in China, the Philippines and Eastern Europe, said Jan Erik Aase, a principal analyst at Forrester Research.

Infosys, India’s No. 2 software exporter, has 3,000 workers in China and plans to double that within 18 months, Chief Operating Officer Shibulal said in a May 1 interview. The Bangalore-based company plans to spend $130 million on a new Shanghai campus.

Tata Consultancy is opening offices in China and Latin America, and hiring locals to staff them, Mukherjee said.

“They’re not limiting themselves to India,” Aase said of all the firms. “There’s too much competition. They have to have other alternatives.”

To ensure a pipeline of domestic talent, companies are molding college programs and spending millions of dollars on training. Tata Consultancy dispatches teams to assess university engineering programs and gives hiring priority to graduates of the more than 500 schools it has accredited so far.

‘There is a Limit’

Wipro, India’s third-largest software exporter, started a program to improve the quality of engineering education at rural colleges. That includes videotaping teachers in the classroom and critiquing their methods, said Nagarjuna Sadineni, the program’s general manager.

Bangalore-based Wipro also set up a four-year academy to teach students from other disciplines, including business and the arts, how to be software engineers, said Saurabh Govil, senior vice president for human resources.

“The biggest challenge for the industry is going to be talent,” Govil said. “It is not only for Wipro, but for the larger good of the industry that we’re working on this one.”

New Facility

Infosys opened a training center in Mysore with 698 faculty members and capacity for 14,000 new hires, according to its annual report for the 2011 fiscal year. The company spends about $180 million a year on training.

Tata Consultancy increased spending on recruitment and training by 91 percent last year to $47 million and is expanding in Trivandrum, near India’s southern tip. Its Peepul Park center can train thousands and plans are under way to build a facility nearby to handle 10,000 new hires.

Even as the IT industry booms, companies say they recognize the potential for hiring binges to hamper quality and flexibility. Firms are talking more about finding revenue streams that don’t depend on headcount, such as intellectual property and cloud-computing platforms.

“There is a limit to the number of people you can continuously keep on adding, making it a huge organization to manage and deal with,” Mukherjee said. “This can’t be a long- term kind of a model.”

--Editors: Michael Tighe, Arijit Ghosh

To contact the reporter on this story: Ketaki Gokhale in Mumbai at

To contact the editor responsible for this story: Young-Sam Cho at

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