All eyes are on Indian IT, with sky-high expectations for the years ahead. While billions of dollars of investments and bookings paint just one part of the picture, the other side hinges on generative AI, which is expected to change the hiring strategy and influence employee salaries.
Based on an analysis by Pareekh Jain, CEO of Pareekh Consulting, IT companies are significantly increasing their hiring of candidates with AI-related skills. Candidates with these skills made up about 10% of total hiring last year, but their share is projected to rise to 20-25% this year.
If companies expand their entry-level workforce by 10% in the future, nearly half of the new hires are expected to be in AI-focused roles. This indirectly translates to the fact that the new hires with the latest AI skills would demand higher salaries as well.
Krishna Vij, VP at TeamLease Digital, told AIM that AI tools will enhance productivity by automating repetitive tasks. They will also create demand for specialised roles to manage and optimise AI systems effectively. “While team sizes may not drastically reduce, organisations are likely to focus on upskilling talent to balance costs,” said Vij.
About 20-25% of fresher hiring in the IT sector is now targeted towards AI skills. This is an uptick from a dismal 5-10% over the last three years. This might result in an upswing of hiring for talented freshers but a downswing for others without the skills.
Therefore, though the salaries for the ones with AI skills might be higher, the ones without them might witness a significant drop as well.
GCCs Driving the Salary Hike
As GCCs establish their presence in India, there’s a growing opportunity for the young talent in the country to leverage their skills in generative AI for a lucrative career with them. According to consulting firm ANSR, about 90% of GCCs in India plan to harness the potential of AI, ML, and cognitive computing in the next 2-3 years.
A recent report reveals that GCCs offer salaries 12-20% higher than those in IT services and other non-tech industries for comparable tech roles. Vij agreed that the expansion of GCCs in India is driving up salaries, especially for niche roles in AI, data science, and cybersecurity. This also creates competition for skilled talent and sets new benchmarks.
“This has prompted IT companies to increase salaries for specialised roles to retain and attract talent. However, to manage costs, many IT firms focus on hiring freshers and upskilling them, building a strong talent pipeline. These companies may need to refine their strategies to remain competitive in attracting and retaining skilled professionals,” Vij explained.
For instance, GCCs provide salaries ranging from INR 9.7 lakh to INR 43 lakh per annum for software developers, depending on experience. In contrast, the IT products and services sector offers around INR 5.7 lakh per annum for entry-level roles, with salaries going up to INR 17.9 lakh per annum for professionals with over eight years of experience.
Moreover, entry-level talent at GCCs in India is attracting pay packages that are, on average, up to 30% higher than entry-level salaries across all sectors. The same should get replicated for the Indian IT workforce that has been collaborating with GCCs over the past few years. For companies like TCS, Infosys, and others, the hike largely depends on their performance. Still, freshers might witness a small bump in salaries, given the larger ecosystem in India.
Mrinal Rai, assistant director and principal analyst at ISG, told AIM that since AI skills are in demand, people with these skills would come at a higher cost. So far, there hasn’t been any substantial change in the salary packages of service providers for freshers.
“However, since both service providers and GCCs are competing for the same talent pool, with the GCCs offering significantly higher packages and better designations to freshers, it gets challenging for service providers,” Rai explained.
The fact that Indian IT is reluctant to hire freshers is not new; it continued throughout 2024. However, things might change next year as it remains one of the biggest concerns for many. According to experts in the HR industry, hiring has become a focal point for several IT services companies.
Finally Better Salaries
Pinkesh Kotecha, chairman and managing director of Ishan Technologies, told AIM that he predicts a 10-15% higher salary for freshers while a salary hike of up to 15% for experienced professionals in the coming year.
“The focus while hiring will be on how techies have upskilled and prepared themselves to be valuable to the company. There is a need for collaboration between academia, technology companies, industry bodies, and professionals to upskill regularly to meet the evolving demands of the modern tech world,” Kotecha said.
In their latest earnings calls, most Indian IT giants have promised to continue reducing their bench size and hiring freshers to increase the headcount.
TCS aims to onboard 40,000 freshers this fiscal year, while Infosys plans to hire 15,000-20,000. Wipro and HCLTech are targeting 10,000-12,000 and approximately 10,000 fresh graduates, respectively. Including mid-tier IT and engineering services firms, around 1 lakh freshers have received offer letters in the ongoing placement season.
This was also resonated by Mohandas Pai, founder of Aarin Capital and former CFO of Infosys, when he told AIM that the hiring will also be affected because around 200,000 people will start retiring early next year in India and the companies will have to fill the positions quickly.
According to a report by ServiceNow, AI is going to create around 2.73 million tech roles by 2028, a lot of which would be in the fields of software development, web development, software testers, and data analysis. With AI assisting them, the report says that the productivity gain would be able to help them transition into advanced roles as well.
With the average package of INR 3.5 LPA in Indian IT, when the demand for AI skills increases, so will the demand from the engineers possessing these skills.
