Top IT cos are all shining, what ails the rest?

India's rapidly burgeoning economy and the flood of new MNC companies have led to a shortage of first-rate mid-level managers and executives within the IT industry. This crisis is not only coming in the way of winning new contracts but also on their ability to maintain and mine existing contracts, says this article in Economic Times.

- Dilip.
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Source: Economic Times, 20-07-2006

PP THIMMAYA TIMES NEWS NETWORK [ THURSDAY, JULY 20, 2006 12:00:00 AM]

The first quarter results from the IT services biggies have started rolling in and they have all shown impressive top-line and bottom-line growth, ranging from 35% to 50%. The story with the Tier II players, in contrast is expected to be less spectacular. And that's not because of a dearth of business. More a case of "plenty of food on the table, but unable to consume and digest it," basically due to lack of quality people in the right quantity in the mid-management. The shortage of people in the 3-7 years bracket is acute in the industry and very pronounced with the mid-sized players. Given their size and brand pull, they find it difficult to attract and retain mid-level talent which has a direct impact on their business growth. Mainly because it is the middle management that is the connecting link between the top management and freshers, performing the dual role of executing projects and mentoring. The Problem However, the genesis of this issue lies in the growth momentum of the Indian IT industry which is clocking 30%-plus rates annually. Smaller Indian IT companies, locked into small deals till the other day, have grown to a larger base with bigger deals. Plus, the MNCs (like IBM, EDS, Accenture, Capgemini) too have stepped on the gas and scaled up their Indian operations. IBM has 43,000 people on its rolls. Accenture is 20,000-plus, a good yardstick of the growth trajectory. And any MNC launching or expanding its operation in the country would typically go for the mid-level talent first. Given their brand pull, mid-level talent often makes a beeline for such companies too. Amitabh Das, CEO, Vati Consulting, a recruitment process outsourcing and advisory firm says: "Getting an experienced candidate at the right time is a difficult task. Take any organisation, middle-level professionals form the backbone of it, without them none of the projects can succeed." Typically for the large companies, if a certain mid-level professional quits half away through a project, it has the wherewithal to fill in this gap. But Tier II or Tier III companies cannot afford this luxury: if a professional at this level quits, it might mean an end to the project and consequent loss of business. Mohan Sekhar, chief delivery officer, iGATE Global Solutions says: "Mid level talent (with 3 to 6 years experience) is extremely critical for growing the organisation and delivering to clients in a predictable manner. These are challenging times for recruiting mid-level managers in India considering the robust growth of the IT industry and the acute shortage in availability of quality talent." e4e India Managing Director Dr Sridhar Mitta says the lack of adequate people at the middle level is a problem with varying degrees for both the large and mid tier companies. He adds that the pressure for a Tier II company is much higher. Points out Tarun Singh, director, Kenexa Technologies: "India's rapidly burgeoning economy and the flood of new MNC companies have led to a shortage of first-rate mid-level managers and executives within the IT industry."

However, Prashant LJ, global marketing head, Infinite Computer Solutions, feels the pressure on fresher's are much higher than at the mid-level. He says Infinite has been able to get these people and map their careers on a fast track unlike the large Tier I companies which provides limited opportunities.

Taking on board less-than-suitable candidates also acts as a double edged sword as companies will have to invest on training them, which affect their bottomlines and limiting resources that can be invested in other core activities.

Also, while the large Indian players have been active in hiring freshers and started visiting campuses a good 5/6 years ago --which now given them a beefy mid layer-- most of the mid size companies focused mainly on lateral hires, making them vulnerable in mid management.

The Fallout

This crisis is not only coming in the way of winning new contracts but also on their ability to maintain and mine existing contracts.

Das says: "Till late 90s, these professionals were loyal to their companies. Now it is difficult to retain them." Sekhar says "there are situations when lack of critical skills affects business prospects." Dr Mitta believes a combination of both internal and external measures are needed to address this problem.

Internally, IT companies need to undertake a lot of training measures whereby they could groom future mid-level professionals. Externally, companies need to look at specialised activity which can provide the edge at the marketplace and thereby attract the talent.

Prashant says creating a much larger role for the mid-level professionals and giving a higher responsibility can act as a strong incentive. Das feels that mid-tier IT organisations that are successful in training, grooming and retaining talent are able to keep afloat. "Organisations which have higher attrition levels and fail to groom the junior levels to grow to the next level suffer."

A way out for Tier II and small companies is to look at markets -- or niche domains -- that are still underserved. Industry observers say that large firms generally deal with large clients and not smaller customers.

This is a space that Tier II companies can generate business. Singh says the technology and research firm Forrester Research has predicted that "companies will now have to change to cater to the specific needs of each vertical or sub-vertical among their clients."