Infosys, India’s second largest IT services company is looking at changing its hiring model to improve its declining profit margins, said a recent analyst report. According to the report issued by Citi Research, Infosys is looking at increasing the proportion of non-engineers in its overall workforce. The company is also looking at looking at converting the 7-month training period of the employees to a mix of online and classroom training.
Citi Research on Monday (January 21, 2013) hosted Bansal for investors meeting in Mumbai post which it issued the report capturing the key takeaways from the meeting.
In the meeting, Bansal has indicated that the non-engineers would be primarily deployed to work in areas like infrastructure management services (IMS), testing and application management (AM).
“Once (employees) utilization improves, Infosys is looking at some changes to the hiring model to improve margins,” it said. This includes, “increase the proportion of non-engineers (leading to better pyramid), particularly in areas like IMS, testing AM,” the report added.
While Bansal did not reply to a query from Business Standard on what will be the hiring mix now, a company spokesperson said they have nothing more to add at this point. However, according to a 2011 report, about five percent of Infosys’ total workforce belonged to non-engineering backgrounds.
Infosys which had been enjoying the highest profit margin among the Indian IT services companies is seeing some pressure on it in the last two quarters. In the quarter ended December 31, 2012, Infosys’ operating margin declined by 66 basis points to 25.68% primarily on account of the offshore wage hikes and full integration of low margin Lodestone’s business.
According to the Citi report, Bansal has also indicated that the company is looking at improving the utilization rate to offset the negative impact of Lodestone and wage hikes on its margins going forward. “Utilization remains the biggest lever to offset headwinds,” it added.
In the Q3 of FY13, Infosys’ utilization rate (excluding trainees) stood at 73.2%, a decline of about 300 basis points when compared with the corresponding period in the previous fiscal.