India's $150 billion domestic IT industry that employs nearly 3.5 million people remained the top choice for engineering and MBA graduates. But the emergence of start-ups and the loss of momentum across top companies such as Tata Consultancy Services, Infosys and Wipro have tempered the enthusiasm for IT firms across India's top campuses.
Here are the reasons for the shift across India's top campuses:
1) Start-ups are doling out unheard of salaries for engineers. According to PhillipCapital, the average salary of a software engineer at Flipkart is Rs 9.80 lakh per annum as compared to the Rs 4 lakh package an engineer is likely to get at India's top four IT firms.
2) High salaries have been made possible by the billions of dollars in funding that start-ups have secured over the last few years. According to Kawaljeet Saluja of Kotak Institutional Equities, private equity/venture capital funding has reached $4.5 billion in this fiscal year (till October 2015), which is higher than such funding in 2014-15.
3) Start-ups can pay high salaries because they employ fewer people as compared to outsourcers where many contracts are still based on the traditional Time and Material model (billing on a per-person, per-hour basis).
4) Much like Infosys in the 1990s, e-commerce companies like Flipkart, Snapdeal and Shopclues have been generous with ESOPs, not only for their star performers, but also for lower rung, non-managerial staff. This has helped attract talent. Most IT companies pay ESOPs to high-ranking employees now.
5) The differentiation in terms of technology that start-ups provide is another factor that is luring away freshers from the IT industry. An engineer at a start-up is more likely to work on technology platforms like Hadoop, iOS and Android unlike an engineer at an IT firm, who may be stuck with legacy platforms like Java, C++ and VB.
6) Start-ups have not only succeeded in attracting youngsters, but also experienced professionals. Over the last 3-4 months, Flipkart has hired key executives from Microsoft, Google, Yahoo and Amazon. Earlier this year, Rajiv Bansal quit as Infosys CFO to join taxi aggregator Ola.
7) The IT industry was the top choice for young graduates because of the lure of onsite opportunity. But increasing regulation and visa restrictions have reduced the scope of onsite opportunities significantly. Infosys has already capped the tenure of an onsite deputation for every employee at 12 months, said PhillipCapital.
8) Start-ups are not the only threat for domestic outsourcers. Global firms such as Microsoft, Google, IBM and Accenture have hired aggressively in India to negate domestic outsourcers' pricing advantage.
9) According to PhillipCapital, global technology and consulting firms remain the "preferred" choice of employment for students because of their MNC background, slightly better salaries, and potential opportunity to relocate to their development centres in the US/Europe.
10) Fresher salaries across IT companies have remained stagnant for years, leading to disenchantment for outsourcing jobs among graduates. The good news is IT companies have realized the shift in favour of start-ups and taking corrective measures. TCS - India's biggest outsourcer - recently increased freshers' salary for the first time in seven years, says PhillipCapital.