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Trained Freshers - A new paradigm
The Indian IT industry is growing at a very fast pace. In the last decade (1998 - 2009), the IT exports have grown at a CAGR of 33% while the domestic IT has grown at a CAGR of 26%. The IT exports have touched USD 47 billion in the year 2009 as compared to USD 2 billion in the year 1998. As per the NASSCOM study the IT/BPO industry has the potential to grow and become a $225 billion industry by the year 2020. This is almost four fold increase over the $60 billion industry in the year 2009. By the year 2020, the exports are expected to reach a figure of US$ 175 billion, while the domestic revenues are expected to reach US$ 50 billion.
This growth will also have a huge impact on employment. The IT/BPO industry currently employs 2.2 million people. This number is expected to increase to 10 million by the year 2020. This is an explosive growth in the requirement of skilled professionals. This is going to create a massive demand for skilled IT professional. This is a big opportunity and at the same times a huge challenge.
The Indian IT industry is already grappling with huge issues on the supply side. This is more so while inducting fresh engineering graduates. The first issue relates to employability. Only 25% of the engineering graduates are employable. The second issue relates to deployment of these graduates on projects. The industry has to train them for 3-6 months before they can be deployed. The third issue is the demand-supply skew. The demand is almost constant through the year while the supply peaks in the middle of the year. All these challenges put a huge amount of burden on the industry in terms of on-boarding costs as well as opportunity cost for not billing on projects.
Since only 25% of the engineering graduates are employable, currently the IT industry is focused on hiring only these graduates. This leads to intense competition as every company scrambles to get the top talent from the engineering colleges. It also puts immense pressure on entry level salaries due to the pressure to attract the top 25% graduates. In addition, the IT companies are forced to hire 12-18 months in advance. The companies hire in advance to lock-in the employable graduates. In all such cases, the numbers to be hired are approximate forecasted numbers. The mismatch between the forecasted numbers and the actual numbers leads to a significant bench cost.
Why Hire Trained Freshers?
There is a strong case for the IT industry to increase the employment pool by focusing on the next 25% of campus graduates that are trainable to become employable. These graduates typically need 10 to 16 weeks of training. The training is a mix of technical skills training with focus on applicability as well as soft skills training. A good model would be to make a judicious blend of on campus and off-campus recruitment. Companies can go for on-campus recruitment and hire employable graduates. They can fulfill 50% of their annual requirements with on-campus recruitment. For the balance 50% of the requirements they can go to training companies that work on the trainable lot and make them employable. This model has the following advantages:
- Fresh graduate hiring can be staggered across the year resulting in huge savings in the bench cost
- Since the hiring numbers are decided close to the actual hiring, they are realistic numbers
- Companies can hire from the training institutes graduates that are trained in the required skills
- Trained freshers can be very quickly deployed on billing projects resulting in huge savings in opportunity cost.
- Since the companies do not have to invest n training, t results in huge savings in terms of:
- Training cost
- Salary cost
- Infrastructure cost
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