January 22, 2010, 10:10 AM — Indian IT companies have started adding thousands of employees after a year of relatively flat growth. But the same can't be said for U.S. companies.
The IT labor market here is showing, at best, signs of stabilizing and modest growth after big job losses, but not anything like last quarter's India-sized leap.
Three of India's biggest IT services firms, Wipro Ltd., Infosys Technologies Ltd., and Tata Consultancy Services have alone added a total of 16,700 employees in the last quarter based on an improving outlook, according to quarterly reports this month. Combined, the three firms employ about 359,000 people.
The major Indian firms see improving demand and believe that the pace of outsourcing is getting back on track. But they may also be betting that when U.S. companies start building out new IT projects, they may turn to outsourcers rather than add or rehire permanent employees.
The recession may have changed views on outsourcing for some firms, said analysts. "As people start up projects, they may rethink about how they bring their developers back," said Tom Lang, a TPI Inc. partner and managing director for CIO services for the Americas.
The U.S. firms may turn to outsourcers, both onshore and offshore, for the flexibility to add and subtract capacity as needed, he said. A move to cloud services may also bring more work to outsourcing, he said.
The downturn "solidify the benefit" of outsourcing, said Atul Vashistha, the chairman of outsourcing consulting firm New Advisory. Companies and suppliers were "able to ramp down fast" with the downturn, he said.
The U.S. IT work force, which peaked at just over 4 million in November 2008, has a lot of lost ground to cover as a result of the recession. The TechServe Alliance, an industry group tracks U.S. labor IT-related occupational data month-to-month, counted 3.81 million IT workers at the end of September, with a net gain of about 11,000 jobs to the end of last month.
TPI, which tracks outsourcing spending, said on Wednesday that the total market value of outsourcing contracts (from an index which measures contracts that are greater than $25 million) was this market's best performance in six quarters, reaching $24.7 billion for the most recent quarter, a sequential increase of 47% and 8% percent year-over-year.
But despite these numbers, Lang said the outsourcing market is just starting to get back to normal, and still has a way to go. Last year "was a very dismal year," said Lang.