IT companies have a high bench strength, which may lead to a decrease in the hiring of freshers this year, say industry experts. Factors such as the economic slowdown and a shortage of demand have led to such a situation. The bench strength of a company is the number of employees who are not involved in any projects at the moment, but are part of the payroll.
Ankita Somani, research analyst, IT and Telecom at Angel Broking, says, "I believe for companies like Infosys and others, the bench strength has increased substantially in the past three years. Utilisation (the number of employees working on a project) is going down, but they have added a lot of new employees."
Utilisation values for Wipro for the September 2012-ended quarter suggest an average of about 77% excluding trainees. So, Wipro's bench strength is 23%. Similarly, Somani puts the utilisation numbers for Infosys and TCS at 68% and 80% respectively. Cognizant shows a 77% utilisation for the same period. Experts say that the numbers are expected to remain stable in the third and fourth quarters.
While the percentages provided high would suggest a high utilisation rate, veteran industry analyst Sudin Apte, CEO and research director at Offshore Insights, an advisory and research firm, says, "Bench impacts, directly, the utilisation and hence the margins. So, companies are very concerned about bench swelling." According to him, there has been a mismatch in what people thought they would sell and the actual demand. Since companies recruit in anticipation of orders, the skills hired originally and those required finally were different. This increased their costs and they could try to maintain a smaller bench in order to increase their margins or reduce costs.
While the utilisation of employees differs from one company to another, Somani says that hiring targets will be lower for every company. "The demand is not that substantial and any increase in the demand in the near future is not expected right now." She also says that the hiring for freshers had been pushed by almost a quarter by Tier I companies in 2012. Further she says, "To cater to any demand coming in, the bench strength is already trained and kept in." Gaurav Kohli, development director from Dion Global Solutions, an IT services company, says, "Hiring has slowed down across the industry. Previously, hiring was done from a future perspective. Employees were recruited to add to the bench strength in anticipation of projects in the pipeline. The trend has now shifted to selective hiring based on skills and deliverables required for immediate projects in hand."
Currently, most companies are in the process of finalising their yearly budgets, hiring numbers etc but 2013 is likely to see hiring on need basis.