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Business trends

Tata Consultancy, Infosys back with hiring spree as digital technologies drive outsourcing

Hiring jumps more than 20 times for top Indian technology companies in July-September

Tata Consultancy Services has over the past one year been riding the boom in new technology spending.    © Sipa/AP

MUMBAI (NewsRise) -- Tata Consultancy Services, Infosys, and other Indian software exporters are stepping up hiring after more than two years as rising demand for digital technologies drive outsourcing.

Hiring has jumped more than 20 times for top Indian technology companies in July-September, data from Kotak Institutional Equities showed. Net hiring for six large companies such as TCS, Infosys, Wipro, HCL Technologies, Tech Mahindra, and Cognizant Technology Solutions stood at 42,427 during the quarter, compared with 2,175 in the same period last year.

The recruitment captures "a more positive view on demand" as well as record high rate at which employees are being placed on projects, the Mumbai-based brokerage said.

The surge in employment comes as Indian software companies make a paradigm shift toward new internet technologies such as cloud computing and artificial intelligence that redefine the outsourcing industry.

According to Gartner, worldwide spending on information technology is set to expand 3.2% to $3.8 trillion next year, while a bulk of this money will come from investments in enterprise software platforms and cloud technology solutions.

As clients warm up to the benefits of new digital technologies, what started as small, pilot projects are increasingly turning to large orders that impact their core operational systems, say analysts.

"That's where Indian IT shines," said Ashutosh Sharma, vice president and research director at Forrester Research. Indian companies are cashing in on this shift in client spending to digital technologies, Sharma said.

Tata Consultancy Services, India's largest software exporter and one of the earliest adopters of digital technologies, has over the past one year been riding the boom in new technology spending, bagging orders worth billions of dollars from clients including the U.K.'s M&G Prudential and American insurer Transamerica.

Last week, in an interview to Bloomberg Quint, TCS' Chief Executive Rajesh Gopinathan said the company won $4.6 billion in orders in the past two quarters, underscoring that its investments in new technologies is starting to pay off.

"If you look at any of the contracts that have been spoken about, almost all of them bet on a very core technology transformation," Gopinathan said. "That's what is leading to large contract wins. I would think bulk of it is yet to unfold."

TCS' strong performance served a reckoner to smaller rivals such Nasdaq-listed Cognizant Technology Solutions, which has nearly three-fourth of its employees in India, to adopt new strategies to cash in on the burgeoning investments in digital technologies. For top Indian technology companies, digital business already accounts for almost a third of their overall revenue.

At an investor conference in New York on Friday, Cognizant said the company's mid-term strategy is to grow revenue between 7% and 11%, keep adjusted operating margins at 19%, and spend at least $600 million on acquisitions every year.

The investments are mainly focused on improving digital capabilities such as artificial intelligence, digital engineering, and interactive software, the company said in a presentation to investors.

Cognizant's move holds a lesson or two for Indian IT companies, say analysts.

"Strength in digital competencies and ability to address requirements of different buyers in a client organization is a must for growth," Kotak Institutional Equities said in a report.

To be sure, Kotak warned that many Indian companies lack strength of digital competencies, but have high revenue growth embedded in expectations. "Alignment of expectations to a more realistic number is a must."

As the quarterly earnings of top Indian IT companies in the past six months point to steady growth in demand led by more deals in a relatively stable macroeconomic environment, the question is if this momentum can be sustained in the next fiscal year that begins in April.

"An argument for a stronger demand environment is helped by continued increase in digital sizes," Kotak said.

--Dhanya Ann Thoppil

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