IT companies have been on a massive hiring spree to meet a talent crunch for these projects, most of which will be up for renewal by 2026, they said.
However, unlike legacy IT projects where renewals were focused on maintenance and required fewer resources to manage, the nature of digital transformation deals means future requirements will exponentially increase deal sizes as well as the talent required to service them, analysts said.
“Net-net, we’re on a 10-year roadmap to full virtual business ecosystems where tech delivery is at the core of every business, and we should see an average growth of about 20% on deals when we average it all out,” said Phil Fersht, chief executive of industry consultancy Hfs Research. “The Tier 1 Indian heritage providers command 60% of the major IT services deals.”
Last week, Wipro chief executive Thierry Delaporte had similar observations about the tech ecosystem while speaking at the company’s annual virtual investor meet.
“We see a strong market in the near and medium term. The pandemic has definitely accelerated transformation timelines…The demand for these transformative technologies will continue to be robust in the years ahead…Talent will continue to be the hottest currency,” Delaporte had said.
Wipro, he said, has decided to accord highest priority to acquiring and retaining talent over the next 12 months.
During the first half of the ongoing fiscal year, India’s top five IT services providers – Tata Consultancy Services (TCS), Infosys, Wipro, HCL and Tech Mahindra — added a net 122,546 employees, to stave off higher attrition rates.
As businesses seek to develop digital platforms to remain competitive, they require more investment each year, not less, said Peter Bendor-Samuel, chief executive of analyst and advisory firm Everest Group.
“Furthermore, they cannot tolerate significant amounts of technical debt and much of their tech base must be constantly updated… This dramatically increases the number of digital transformation projects that they source to third-parties and sets the stage for a secular change in the number and sizes of digital transformation projects as we look into the future,” he said.
This demand environment will lead to a global talent deficit for the foreseeable future even if some legacy skills become obsolete, Bendor-Samuel added.
However, the demand scenario is unlikely to be followed by a period of extreme contraction or layoffs.
“The market may go from red hot to hot due to economic cycles; the underlying imbalance between labour supply and demand looks to continue. It also seems unlikely that despite efforts to expand supply these efforts will be enough to address the imbalance anytime soon,” he said.