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.
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.