IT sector to record lowest growth in 10 years: Deloitte

MUMBAI:The average salary hike at Indian companies is expected to fall to 9.1% this year from 9.4% last year, with the IT sector facing spending cuts from clients, which are seeing their worst growth in a decade. The impact of the recession in developed economies is expected to push attrition in the IT industry down to pre-COVID levels of 15-16%, from 19.7% last year, according to a study by auditing and consulting firm Deloitte India.

“The IT sector is expected to see the lowest growth in a decade, led by IT product companies and digital e-commerce firms,” said Anandorup Ghose, partner at Deloitte India. His India Talent Outlook 2023 estimates salary hikes in the IT segment at 9.1%, down from an actual increase of 10.3% last year. The projected hike for IT was 10.5% in 2022, up from 10% a decade ago.

After almost a year of a hiring spree fueled by strong demand for IT professionals across industries, the sector is grappling with a crisis among its global clients and a major banking crisis in the West. Many large foreign technology companies have laid off large numbers of employees, saying they “hired too many.” The knock-on effect is being felt in the Indian technology sector as well.

The Deloitte study, which gathered data primarily from HR leaders at 300 companies across 25 sectors, found that the life sciences and manufacturing sectors will see the biggest increases in 2023. Both sectors are expected to see pay increases of 9.5%, compared with an actual increase of 9.7% last year.

The life sciences industry has been largely unaffected by the pandemic and is still not feeling the effects of the economic crisis, Ghose said in an interview.

The Deloitte study also found that there is a lack of visibility in India of the skills needed to change business models or advance.

About 42% of organizations do not regularly review their frameworks to align with changing business requirements. While some industries, such as IT and IT services, have identified how to improve their workforce, in other industries, such skills are learned on the job and are not well-defined. Ghose said this can be a challenge when companies want to change their business models, as they did after the pandemic, because there was a demand-supply gap in talent.

Only 19% of organizations—mostly in the IT, ITeS, and consumer sectors—confirmed that their employees have visibility into skills beyond their current role. “The study found that more than 80% of organizations reported that management teams do not have structured data or reporting mechanisms to understand their current skill capital,” the report said.

Meanwhile, the recessionary waves are expected to bring attrition rates back down to levels seen in 2019 and early 2020. “In high-growth sectors where there was active hiring, we’re seeing a marked slowdown in new investment and activity,” Ghose said. Attrition is expected to be between 15% and 16%, down from 19.7% in 2022 and 19.4% in 2021.

Artificial Intelligence (AI) and Machine Learning (ML)-based analytics tools are being used to improve talent management. Manufacturing and IT sectors are set to become the largest investors in HR Tech in 2022, with 3.8% of total employee costs being budgeted for HR technology improvements in most organizations.