Ratings agency Crisil on Monday said the information technology sector is likely to lose its position as a mass employment engine and new recruitments will nearly halve over the next three years, even though companies will continue to report good revenue growth.
"Despite healthy revenue growth of 13 per cent for IT services foreseen in the medium-term, aided by recovery in discretionary spending by clients, recruitments will shrink by around halve by fiscal 2018 (from the current levels) with vendors focusing on cost optimisation by maximising revenue-per-employee," the Crisil report said.
This will be bad news for technology graduates, who are getting hired in large numbers from their campuses during the past few years, it said.
"Hiring and revenue growth will decouple as IT companies alter their business models... the sector, which is a mass employment engine now, is unlikely to remain so in future," Crisil said.
The ongoing global weakness is forcing clients to trim their spends, which has in-turn forced IT companies to find ways to rationalise costs and ensure profitability.
Software companies are implementing measures such as reducing bench strength, improving employee utilisation rates and reducing other operational costs.
"Despite the predicted revenue growth, companies will run very tight ships because of which incremental employment will be curbed," it said.
There will be a greater focus on 'lateral hires' of professionals with domain-specific skill sets and expertise, it said.
Crisil said the IT sector, with revenues of $118 billion, currently employs 3.1 million people and accounted for a fourth of the total organised sector employment generation in FY14.
Between FY02 and FY14, revenues grew at a compounded annual growth rate of 18 per cent while the employee-base grew by 15 per cent, it said, spelling out three phases of the employment growth.
The new phase, it reiterated, is one of de-linking revenue and hiring growth. "Aspirants for IT jobs will have to develop lateral, even completely new skill sets to make themselves more future-ready," it added.
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