CHAPTER - 1

HRD MANAGEMENT IN IT INDUSTRY

1.0 INTRODUCTION
1.0.1 Success of every business enterprise depends on its human resource. Money, material
and machines are inert factors; but man with his ability to feel, think, conscience and plan is the
most valuable resource. At the same time human elements are most difficult to be inspired,
controlled and motivated. The upcoming competition in India, will demand high
motivational level of its employees.
1.0.2 Growth of an enterprise is vital for the economic development of the country. This is
possible only by maintaining the enthusiasm and motivation of the employees, which is vital for
carrying out the operations in most efficient manner. The most successful companies, all over
the world have designed their business policies to achieve higher productivity by using
potentiality and strength of people.
1.0.3 The basic aim of human policies is the genuine concern for the people. Proper design of
human policies is based on the higher responsibilities, personal and positive approach in the
total perspective of organisational interest. The world's best companies have established their
strength with their people. The employees identify themselves with the company they are
working for. This also help in building up their spirit, morale and espirit-de-cops which becomes
strength of the company. The culture of excellence thus nurtured contribute to growth with
stability and continuous improvement in productivity.
1.0.4 Finding the right man for the job and developing him into a valuable resource is an
indispensable requirement of every organisation. Human resources are capable of enlargement
i.e. capable of providing an output that is greater than the sum of the inputs. Proper recruitment
helps the line managers to work most effectively in accomplishing the primary objective of the
enterprise. In order to harness the human energies in the service or organisational goals, every
manager is expected to pay proper attention to recruitment, selection, training, development
activities in an organisation. Proper promotional avenues must also be created so as to motivate
employees to peak performance. Thus, personnel functions such as manpower planning
recruitment, selection and training, when carried out properly, would enable the organisation to
hire and retain the services of the best brains in the market.

1.0.5 The human resource management is very crucial in respect of information

technology services than other manufacturing or marketing enterprises. The IT services are
technical in nature and at every stage the human touch is involved. Hence it is well motivated
and devoted manpower which is very much essential for the success of IT industry.
1.1 ROLE OF HR MANAGERS
1.1.1. And Some industry commentators call the Human Resources function the last bastion of
bureaucracy. Traditionally, the role of the Human Resource professional in many organizations
has been to serve as the systematizing, policing arm of executive management. In this role, the
HR professional served executive agendas well, but was frequently viewed as a road block by
much of the rest of the organization. While some need for this role occasionally remains you
would no want every manager putting his own spin on a sexual harassment policy, as an
examplemuch of the HR role is transforming itself. The role of the HR manager must parallel
the needs of his changing organization. Successful organizations are becoming more
adaptable, resilient, quick to change direction, and customer-centered. Within this environment,
the HR professional, who is considered necessary by line managers, is a strategic partner, an
employee sponsor or advocate, and a change mentor.
1.1.2 Strategic Partner:-In todays organizations, to guarantee their viability and ability to
contribute, HR managers need to think of themselves as strategic partners. In this role, the HR
person contributes to the development of and the accomplishment of the organization-wide
business plan and objectives. The HR business objectives are established to support the
attainment of the overall plan and objectives. The tactical HR representative is deeply
knowledgeable about the design of work systems in which people succeed and contribute. This
strategic partnership impacts HR services such as the design of work positions, hiring; reward,
recognition, and strategic pay; performance development and appraisal systems; career and
succession planning; and employee development.
1.1.3 Employee Advocate:-As an employee sponsor or advocate, the HR manager plays an
integral role in organizational success via his knowledge about and advocacy of people. This
advocacy includes expertise in how to create a work environment in which people will choose to
be motivated, contributing, and happy. Fostering effective methods of goal setting,
communication, and empowerment through responsibility build employee ownership of the
enterprise. The HR professional helps establish the organizational culture and climate in which
people have the competency, concern, and commitment to serve customers well. In this role,
the HR manager provides employee development opportunities, employee assistance
programs, gain sharing and profit-sharing strategies, organization development interventions,

due process approaches to problem solving, and regularly scheduled communication

opportunities.
1.1.5 Change Champion:-The constant evaluation of the effectiveness of the organization
results in the need for the HR professional to frequently champion change. Both knowledge
about and the ability to execute successful change strategies make the HR professional
exceptionally valued. Knowing how to link change to the strategic needs of the organization will
minimize employee dissatisfaction and resistance to change. The HR professional contributes to
the organization by constantly assessing the effectiveness of the HR function. He also sponsors
change in other departments and in work practices. To promote the overall success of his
organization, he champions the identification of the organizational mission, vision, values, goals,
and action plans. Finally, he helps determine the measures that will tell his organization how
well it is succeeding in all of this.
1.2 LEADERSHIP AND EMPLOYEE INVOLVEMENT.
1.2.1 The main role of leadership was seen as creating a participatory process for employee
involvement, to build collective wisdom. Control has given way to collaboration and the old
paradigm of promoting competition and motivating through incentives shifted to creating cooperation and oneness amongst people. This is a marked shift to build effective teams.
Research shows that six out of every 10 employees like to work in teams. 87 per cent of all
Fortune 500 companies use parallel teams and about 100 per cent of all companies use project
teams.
1.2.2 Story telling and appreciative enquiry are emerging as a new dimension in positive
motivation. Finding out what's wrong seems to be the trend. In Walt Disney, telling success
stories is one of the important methods used to remind people of greatness and goodness of the
organisation. Leaders in Disney concentrate on quality, values and involvement. Speaking in the
plenary sessions, Tom Peters said, " We have transitioned from an asset-based economy to a
talent-based economy. The new definition of lay-off is untalented go talented stay. Leaders must
realise that talent is equal to brand". His new theory is EVP which means "Employee Value
Proposition".
1.2.3 Rosabeth Moss Kanter said, " Human beings are good raw material, they become assets
when you train them to increase their knowledge and skills". She added that only a few
organisations really train people to make them a success. Seconding this, Mr Peters pointed out
how most organisations are not serious about developing people. They spend on an average
26.3 hours per person per year on training. A surgeon, a pilot or an athlete on the other hand
spends 10-15 times more on training.

1.2.4 He also stated that the HRD department should be renamed TDFD (Talent Development
Fanatic Department) and wealth for this new regime will flow from innovation, not organisation.
Quoting Gary Hamel he said, only those employees will succeed who are "certified radical".
Only those companies will succeed who create a cause, not a business. Leaders according to
him are living individuals, whom people can smell, feel and touch. Their passion for work must
be infectious.
1.2.5 Another aspect of leadership if the decision to introduce fun in the work place. Research
shows that this reduces absenteeism and builds stronger, deeper and longer lasting
relationships. It appears out of every 100 Fortune companies in the last decade, 69 are dead
and only 31 are alive. In a Forbes Magazine study of around 100 companies from '17 to '87,
only 39 companies were found to survive. Management of Change:-Research proves that many
change models don't consider the human experience during change. The overriding concern
seems to be to downsize. It was found that most change processes go through four
fundamental stages.

People try to resist or deny change

They adapt, participate in the change

They attempt to add value

The culmination or formation of a new status-quo

1.2.6 A number of presentations revealed that leaders who initiate change must do so with one
foot in the future and the other planted in past values. Forgetting tradition must can devalue
existing strengths. The success of a change process depends on the skill of the facilitator to
create a participatory process to enlist the support of people and address the issue of grief.
1.2.7 E-Learning :- Organisations like Ford Motor, Hewlett Packard, Intel and IBM are using elearning to increase the knowledge of their people. Companies like Fordstar even manage time
differences between countries while conducting virtual class rooms, chats, demos,
presentations to communicate new concepts, product details, core values, issues of governance
and corporate communities.
1.2.8 CEO's are talking to their people about new ideas and enlisting their support through
forums and message boards. This is changing the way people behave and work. The
advantages of e-learning are many: It is self-paced, flexible, less expensive, modular and has a
huge reach.

1.2.9 Universities like Cornell, MIT, Stanford, etc, have started emphasizing e-learning to attract
a worldwide audience. Web-centric universities are becoming the order of the day. William
Taylor, editor and managing partner of the Fast Pace magazine, said, "There is no going back
from back from dotcoms". He was of the opinion that there is a merger taking place between
computers and human beings.
1.3 INNOVATIVE PRACTICES IN HR
1.3.1 The Innovative Practices in Human Resources study uncovered 12 practices that are
reducing HR costs and improving service quality to employees. Key findings from this research
included the need for HR managers to streamline processes, lower overhead costs, and enable
their departments to advance from transactional organizations to strategic partners in the
business.
1.3.2 Practices and technologies include:

Internet and intranet employee services

Strategic human resources

Centralized HR departments and call centers

360-degree performance appraisals

HRIS systems

Employee self-service

Voice response systems (VRUs)

Resume scanning and Internet recruitment

Kiosks

Automated time and attendance systems

Team policies and development

Outsourcing

Business process reengineering (BPR)

1.4 LINKING PAY TO PERFORMANCE

1.4.1 Most Human Resource professionals are familiar with the concept of strategy. There is
much more concentration and focus today on the strategic outcomes of human resource activity
than ever before. The area of compensation is no exception.
1.4.2 Pay for performance systems are becoming more and more popular as senior managers
reach beyond the use of compensation systems to deliver pay. There is far more interest in
more closely linking the reward mechanisms to the achievement of corporate objectives.
Motivation for superior performance is the goal.
1,4.3 In experience, most organizations will profess to a "pay-for-performance" philosophy as a
keystone of their compensation system. Such a system requires solid grounding in a clear and
documented link between performance and salary increases. Unfortunately, the link between
individual performance and pay is frequently nonexistent - "merit" pay is a hollow concept in this
regard.
1.4.4 A merit system demands that managers be willing to make distinctions in merit increases
based on performance. However, several factors get in the way of this happening. First, the
annual salary change is usually a small percentage. Giving the better performer 2% more than
the cost of living has little motivation or recognition attached to it. Similarly giving the poor
performers 2% less than the cost of living increase is not that much of a penalty. So many
managers don't make that distinction - it is too much hassle. So everybody gets the same
increase.
1.4.5 Second, most performance appraisal systems are after-the-fact appraisals. In other words,
at appraisal time, which is usually toward the end of the year, managers are required to evaluate
the performance of their staff. It means sitting down and trying to reconstruct what each staff
member did, capturing it in a non-threatening way, communicating the evaluation without a fuss
and finally, making a merit increase recommendation. Sound like a familiar pattern? It is a
process that repeats itself year after year.
1.4.6 The end result is usually a lot of avoidance behavior. Managers avoid the appraisal
process like the plague. Although employees profess to want to "know where they stand" they
often take issue with the appraisal. Besides, they don't listen to the evaluation, they wait until
the penny literally "drops". "What is my rating and how much do I get?" is a constant theme in
merit systems where salary decisions are tied so closely with the appraisal process.

1.4.7 You might well ask is there any way out of this mess? The answer is fortunately yes.
Organizations that are the best and want to separate themselves from the rest, are turning away
from the merit system and toward an annual incentive system, particularly for middle and upper
management positions but increasingly for teams and individuals lower down in the organization
as well.
1.4.8 They are adopting a system of annual incentive bonuses linked directly to the
achievement of corporate and individual objectives in three specific areas. The areas are
corporate revenues and gains, cost containment and behavioral changes. The first two areas
are quantitative and the third area, which is gaining in importance, is qualitative in nature, and
has a great deal to do with building managerial and individual competence.
1.4.9 Why Is This Transition Occurring? :-Well, there are many challenges facing businesses
today and these challenges are driving them to find better ways of linking pay and performance
to the achievement of corporate results..
1.5 CHANGING JOB DESIGN IN IT COMMUNITY
1.5.1 The California State University (CSU) system is being challenged to meet increasing
demands for educational and administrative services through the innovative use of technology
and human resource systems. Even though funding levels for higher education have been cut in
recent years, public/taxpayer expectations and the demands for quality education, access,
service, and accountability have grown. Technology initiatives within the CSU have resulted in
significant advances and improved technical capabilities and efficiency. Human resource and
organizational systems are also needed to capitalize on and thrive in this rapidly changing work
environment.
1.5.2 In 1991, the CSU began a study to look at alternative work and job design approaches to
meet these challenges. The study focused on the information technology community and how
work processes and activities could be better organized to remove artificial barriers and improve
organizational effectiveness, a process often associated with the term "reengineering."
Secondly, the study focused on developing a job design approach that could adapt to changing
skill requirements and that would promote the continuous acquisition of skills for knowledgebased employees in information technology. The goal of improved organizational effectiveness
and an orientation towards reengineering and skills guided the development of the proposed job
design approach.
1.5.3 This article begins by identifying several trends that led to the study, then describes the
overall project within the context of an organizational effectiveness equation. A new job design
approach that was proposed as a result of the study is presented, including a new classification

structure and competency dimensions and measures for defining and evaluating positions.
Finally, other supporting systems are described for an integrated human resources approach.
The development phase of the project has been completed, and the CSU anticipates entering
into negotiations with its employee representatives in the near future.
1.5.4 Three trends have had a direct impact on the development of a strategic job design
approach for the information technology community at the CSU: (a) diversification and
convergence of technology, increased demand for educational access and (b) changes in
instructional delivery methods; and changing work place demands and priorities.
1.5.5 The technology demands within higher education lead to a complex and dynamic
computing environment. Academic and administrative computing strategies tend to be at crosspurposes in terms of defining systems requirements. This has resulted in widely diverse
systems and technology within and across the CSU's twenty campuses. Increasingly, however,
campus systems are becoming more integrated, as data are shared across multiple platforms
on a network "highway" that is linked to external information sources. Networking and desktop
computing have removed traditional boundaries for information access, research, and decisionsupport purposes. Data, voice, and video technologies continue to be combined in more
interactive and user-friendly formats.
1.5.6 In terms of educational trends, many institutions offer distance learning using various
transmission media and are incorporating instructional technology into curriculum development.
Students expect guaranteed access to technology and to research databases, and this access
has become an issue of social responsibility.[1] Library and computing functions are becoming
increasingly interdependent in "an infrastructure of scholarly communication" within higher
education.[2] Workplace trends, as presented in Sustaining Excellence in the 21st Century: A
Vision and Strategies for College and University Administration, well represent the outlook for
the CSU. Two key issues are identified:
(1) Economics. There is increasing pressure to constrain administrative costs within the "labor
intensive cost structure" that exists in higher education. Reductions in staff are occurring at the
same time as transaction volume and service expectations are growing.
(2) Decentralization of responsibility. With fewer people and greater access to information,
organizations are moving responsibility for decision-making downward to the point of service.
Work organization is shifting away from job specialization and a task/procedure orientation, to
more generalized job responsibilities focused on outcome and greater participation on crossfunctional teams

(3) Another central workplace trend is the "earning and learning" environment described by the
U.S. Department of Labor in its Secretary's Commission on Achieving Necessary Skills
(SCANS) report. To quote Thomas P. Foley, Secretary of the Pennsylvania Department of Labor
and Industry:"We've changed from the idea of "one skill, one job" to the reality of a range of
skills that have to apply to a number of different kinds of professions. More to the point, workers
must possess a skill that they continually upgrade just to keep pace in the professions they
choose."
(4) The influx of new technology and applications has created a demand for continual learning
and adaptation. Due to the CSU's relatively stable workforce, maintaining skills to keep pace
with changing technology was identified as a critical goal. Knowledge requirements are
expanding to encompass a greater breadth of technologies and subject expertise, as well as
including process-oriented capabilities such as communication and negotiation skills.
1.5.7 The implications of these technological , educational, and workplace trends point directly
to the need to reengineer organizational structures, work design, and processes. Based on
these trends and overall organizational goals, two key objectives were established for a new job
design approach for the CSU: flexibility and skill development. Fundamentally, each campus
needs the flexibility to achieve its goals by distributing work assignments in a way that optimizes
its available skill mix and promotes individual skill development and initiative.

1.6 OBJECTIVES OF STUDY

1.6.1 Following were the objectives of the study:1. To enlist emerging HR trends in Indian IT Industry
2. To review literature and research done in this area.
3. To find out lacking areas regarding the HRD in IT sector.
4. To measure the perceptions of IT sector employees in respect of application of HRD in their
organisation.
5. To suggest the measures to fill the gaps and improve motivation level of employees and HR
management in IT industry.

1.7 RESEARCH METHODOLOGY

1.7.1 The study was exploratory in nature. All published and unpublished available on the
subject matter was consulted. Interview and discussions were held with the various executive/
Managers/ staff employed in IT sector. The HRD functions/ activities being undertaken in
different IT organisations were also studied. Primary and secondary data available with these
organisations was also used for this project study.
1.7.2 In order to measure the employees perceptions of emerging HR trends in different IT
organisation, the survey was undertaken. The survey was based on structured questionnaire.
The questionnaire was mainly based on objective type close-ended question, but few open
ended questions were also included.
1.7.3 Firstly, the pilot survey on ten randomly selected respondents was undertaken. Then the
questionnaire was modified accordingly, if desired.
1.7.4 The final questionnaire was administered in person to the extent possible and through mail
if needed. The 100 respondents were selected among the executives and staff working in
various IT organizations. The convenient random sampling technique was used for the selection
of the respondents.
1.7.5 Finally, the results of the survey has been presented in Tabular form, analyzed and
interpreted to meet the required needs of this project study and presented in Report form.

CHAPTER -2

HR TRENDS IN IT INDUSTRY
2.0
2.0.1

HR IT SCENARIO
The web is altering the HRD landscape beyond recognition. The key to corporate success in
the fast changing information era is thinking on your knees.

2.0.2

What is this thinking on your knees? Normally as the HR person you know what the
situation is and operate from there. A repositioning is required in your
decision process with questions like why, how and when and not just what. At this point
you operate on your knee i.e. with far more dynamism and with a lot more effectiveness
than thinking on your feet.

2.0.3

The employees are like gypsies, on the move all the time. They camp at some location,
enhance their skills, responsibility levels and move on. This is particularly true of the
professional from Software Industry. Opportunities are plenty and the next job opening is
only a mouse click away. The question is not about what else you can do to retain an
employee but it is about making him productive, while he is with you. The value addition
will then happen for both the employee as well as the employer resulting in a win-win
situation. This means that the new strategy calls for the recognition that no employee is

expected to be permanently with you. Normal tenure in any organisation is likely to be

between two to three years.
2.1

INNOVATION IS THE KEY

2.1.1

Information

technology and Internet have changed several equations. Reaching out to the

world market place is no more the challenge in achieving corporate victories. Out
thinking the competition at electronic speed is the key to winning corporate battles. The
corporate success is sum total of entrepreneurship practiced by your staff.
2.1.2

The key to employee longevity :-Todays most successful organisations recognize that
to fuel growth and sustain a competitive advantage, they must make recruiting, hiring and
retaining top talent, as the organisations major thrust area. Competent people deliver the
rest dont matter. Successful business organisations have no choice but to promote the
performers and let non-performers go.

2.1.2

Organisations recognize that that their ability to gather, manage, analyse, distribute
information and transform themselves into a learning organisation will provide continuity
and ensure for them their leadership role. Systematic organizational learning should be
central corporate philosophy. Learning, must be obviously followed by changes, which
may not necessarily be welcomed by veterans in the organisation. But change is the only
Constant for guaranteed success.

2.1.3

Points to note: The following points are important and must be properly understood.

People have a great deal of informational knowledge to contribute to the organisation.

People are responsible

People desire opportunities to effect change, not just being expected

to change.

Organisations need to create awareness amongst their employees

about their vision and then empower them to act on that vision.

Establishing a sense of urgency well ahead of the problem surfacing.

Form inter-functional core group. Encourage the group to work

together as a team.

Plan and create short-term win targets reward employees and

recognise achievers.

Consolidate improvements through a knowledge base driven system

and institutionalise proven new methodologies.

2.1.5

New Paradigms In HR

Business plans must consider HR issues, focus and adapt.

Corporate

goals

must

factor

in

individual

career

growth

and personal growth must be tied to corporate growth and vice versa
2.1.6

Job responsibilities must facilitate personal development and

learning should be institutionalized with well-established knowledge
bases. Capturing experience and making it available corporate wide
should be a permanent feature of an organizations.

2.2
2.2.1

WAR FOR TALENT

The worlds most popular people resource base seems to be falling short of numbers to
meet its own demands. With added pressures of migration and attrition, can Indias IT
industry achieve its software and services revenue target of $87 billion by 2008?

2.2.2

Country: India. Population: 1 billion-plus. If that sounds like too many people, think again.
Plug in English-speaking and low labor costs, and suddenly we can envision $50-billion
software exports target by the end of this decade. Not impossible, if we consider the
scarcity of IT manpower across the world. Take a look at the US, already with a 10million-strong IT workforce, which needs to fill 1.6 million new jobs in the next one year.

2.2.3

Japan is no different and estimates close to a million new jobs. Germany is looking for
20,000 IT specialists and Italy is seeking 15,000 additional manpower. Their choice
destinationIndia.

2.2.4

Ironically, the country which has been such a popular people resource for the IT industry
the world over, is struggling with numbers to meet its own demand. To meet the overall
software and services (domestic and export) target of $87 billion by 2008, according to
the Nasscom-McKinsey report, the country will require a minimum of 2.2 million
knowledge workers for its domestic needs. This implies that the present strength, which
stands at 12,00,000 (December 2004), has to increase about twice, not just in quantity but
in quality as well.

2.2.5

According to industry estimates, majority of the demand for manpower will be in the area
of IT-enabled services. While Nasscom puts the requirement at 11,00,000, MIT says ITenabled services and e-business will need 12,70,000 workers by 2007. Experts insist that
since this sector does not require very highly skilled manpower, we can easily meet this
demand. "IT-enabled services is a wonderful opportunity for India and for such services
you dont need highly skilled professionals. You just need smart graduates who can speak
English, all you need to do is train them. For instance, in a call center, they need to be
trained on accents and customer services,"

2.3

4 Rs of HR in IT
Table 2.1

Recruiting

Retaining

Retraining

Restructuring

Signing bonus

Retention bonus

Job rotation

Broad job
descriptions

Finders Fee

Project pay

Team
assignments

Alumni
connections

Reduct FTE/same
pay

Non-techs

Telecommuting

Students

Externs

Skill
inventories

Flexible
compensation
programs
Flexible jobs

Competency
development

Positive problemsolving spirit

Interns

Job sharing

Certification

Recognition
programs
2.3.1

OBSTACLES

Denial (This is and long term)

Misalignment (Ramping up/Ramping down)

Timing

Treating everyone the same

Navigating the bureaucracy

Demographics

2.3.2

WHAT OTHERS ARE DOING

Pooling recruitment efforts

Increasing freedom at the dept level

(on-the-spot hiring, broadbanding, etc.)

Recruiting/retaining students

Identifying
tech
skills
(Skill Inventories/assessment)

Sharing staff

2.3.3

RETENTION FACTORS
1.

Quality of boss

2.

Direction of department

3.

Exposure to new technologies

4.

Confidence in the company

5.

Job security

6.

Challenging work

7.

Location

8.

Access to capital resources

9.

Caliber of co-workers

in

all

jobs/people

10.

Empowerment

11.

Department leadership

12.

Ability to influence department success

2.3.4

TAKING THE LEAD

See ourselves as problem-solvers

Develop critical skills and competencies in ourselves, then others

Build compensation around results not tasks; competencies, not

seniority

Involve everyone. Constantly align and balance resources to meet

changing needs

2.3.5

SEARCH FOR TOMORROW

Attract, retain and reward the best performers (Encourage all to be the best)

Increase flexibility

Reduce fixed costs

Reduce administrative effort (Simplify, simplify, simplify)

Utilize the full range of individual talents

2.3.6

THE CRISIS

Shortage of IT workers

2.3.6

COMPETITION

Compensation stock options, profit sharing, incentives

Alternatives outsourcing

2.3.7

ATTRACTING

Recruiting sign on bonuses

2.3.8

2.3.9

Relocation incentives

Recruiters

Reduced cycle time for hiring

Campus/ job fairs / referrals/ internet

RETAINING

Work environment

Communication forums

Telecommuting

Flexible staffing

Exciting projects

PRACTICES

Focus on value

Financial and human value

Commitment to core strategy

Linkage between culture an system

Multi dimension communication

Stakeholders partnerships

Mutual support and collaboration ( teamwork)

Risk and innovativeness

Passion

2.3.10

2.3.11

DEVELOPING

Internship programs

Training programs

Career development programs

LONG TERM SOLUTIONS

Education, government, industry partnerships

Curricula:

technical

skills

and

career

skills

teamwork

and

communication)
2.3.12

KEY SUCCESS FACTORS

Understand people

What they want

Long term perspective

Innovative

Co ordinated approach

Career development I

2.4

OUT SOURCING

2.4.1

In the last few years, more and more companies around the world are looking towards India
for outsourcing their software requirements. The changing business environment is
demanding new applications. In particular, the spread of client-server computing in
decentralised organisations involves the development of applications specific to a user's
business.

2.4.2

Outsourcing is becoming a strategy for forward thinking IS managers. It is no longer just a

means for reducing costs, but a tool for adding value to business. It enables organisations
to concentrate on their core business, carry out business re-engineering and provide
information that is valid, timely and adequate to assist decision making at the
management level and quality and cost control at the middle and lower levels.

2.4.3

As a result, outsourcing has gradually grown beyond the traditional idea of "having a third
party running the data centre". It has come to mean, "any use of an outside contractor to
replace or extend in-house resources".

Outsourcing is closely linked with corporate strategy, since it must support the organisation's major
initiative in using IS. It should enhance and add value to the business. A rule of thumb to
start and gain experience is, "if IS is low cost and of high value addition, keep it within
the organisation, i.e. in-source. If IS is high cost and of low value addition, consider
outsourcing".
2.4.5

In the past few years, whenever organisations around the world have outsourced to India,
the Indian software companies have substantially helped to cut costs in software
development projects or MIS environments, while maintaining high quality. Moreover,
all these cost and quality advantages are coupled with the use of state-of-the-art
technologies.

2.4.6

In 2004-05 more than US$ 2500 million worth of software development work was
outsourced to India (The total software exports from India during the year was US$ 4085
million). This was 56% higher than outsourcing orders in 2003-04. It is estimated that
the quantum of outsourcing may jump to US$ 5 billion and reach as high as US$ 10
billion by 2010 A.D.

CHAPTER - 3
HR PROBLEMS OF INDIAN IT PROFESSIONALS

3.0

OVERVIEW OF PROBLEMS

3.0.1

The IT revolution is sweeping the world, particularly the western world in for nearly a
decade now, creating enormous employment opportunities in this area. India joined the
bandwagon well in time and smoothly though it is yet to entrench itself strongly in terms
of corporate identity and significant share of global revenues in IT.

3.0.2

Our main contribution seems to be in the less glamorous areas of value addition,
maintenance, Y2K, quality assurance and customisation of existing packages. The sudden
eruption of opportunities in this area left no time for development of human resources in
a planned manner and also software solutions which tended to be more ad hoc than being
assured of quality.

3.0.3

With the enormous opportunities for employment, entrepreneurship with low capital
investment and low gestation period for turning profitable, higher returns per employee
and large return on investment/EPS, sustained encouragement from government, a very
large number of organisations - large, medium, small - have been established.
Correspondingly a large number of training establishments and cyber cafes have come
up, most of which are in the cities and towns to cash in on the enthusiasm of the urban
middle class.

3.0.4

A number of higher level courses have also been started mainly through private
organisations besides the existing government (State/Central), university and autonomous
institutions. There are about 500 private engineering colleges besides IITs, RECs,
universities, colleges offering courses such as MCA, M.Sc., M.E., and M.Tech. In view
of the apparent demand that appears to be exaggerated, most of the programmes (barring
a few by government institutions and IITs) are very expensive, almost beyond the reach
of a middle-class student. Yet candidates and their parents strain themselves financially to
pursue the courses hoping to get an attractive job (financially) which remains a mirage by
and large. The problems are further compounded by a lack of proper teaching faculty in
most colleges and franchises.

3.0.5

Except in well-established institutions, job-placements are poor. Even those trained in

reputed institutions find their jobs monotonous, leading to depression. Jobs offered by the
software industry have demonstrated the above factors as they are able to carry out the
projects with persons of any background and levels of attainment, but with a few months
training either prior to employment or a short training during probation.

3.0.6

Despite these deficiencies, students prefer software jobs mainly with an eye on the paypackage and urban locations. The employee- retention period even in good companies
has been shrinking and is found to be three to six months. The companies also try to
devise methods to make their employees almost captive with surety bonds, bank
guarantees, employee's stockoption (ESOP) and housing facilities, among others. The
employees, for their part, resort to innovative methods to wriggle out of their contracts.
There does not appear to be any respectable ethics even among companies as well as the
employees in this type of free for all market. To go abroad and become rich has become
the motive of most of the employees even if the job does not offer any intellectual
satisfaction. The manufacturing and hard-core engineering sector has also shrunk in terms
of job opportunities and attractiveness.

3.0.7

Even those software professionals, who are offered good financial packages, spend
their earnings on expensive lifestyles, vehicles, and credit card syndrome and find
themselves disenchanted on all fronts including the intellectual front. It should also be a
cause for concern to project beyond the present software boom as to what happens to all
these if the opportunities decline. The scenario appears to be quite fluid with a
predominant western bias in all the activities concerning software profession with scores
of Indian boys getting lured and sucked into the vortices created by the opportunities in
this area

3.1

MAIN PROBLEM AREAS

3.1.1

The significant problem areas which may be contributing to the present scenario and can be
addressed can be identified as given in the succeeding paragraphs.

3.1.2

Recruitment process :-Without going into the deficiencies of the present practices, the
following suggestions are made to improve the process in terms of efficiency, availability
of manpower and equity to all the aspirants irrespective of the fact where they got
educated. The various steps of the proposed approach are as follows:
i.

Aptitude tests could be conducted by reputed institutes like IITs/ private organizations/HR
agencies for prospective professionals preferably ``on-line'' like GRE, GMAT etc. or
physically at regular intervals and scores are given. If it is no on-line, the periodicity can

be a month or two and the validity can be for an year or so which can also be fixed based
on general agreement.
ii.

Based on scores and preferences of the candidates (career counselling), companies can
ask for a video clip for subsequent interview if required. Interviews can also be
conducted simultaneously either physically or over the phone or by video conference and
selections completed.

iii.

Once selected and the candidate joins the organizations, all member organizations should
adopt a code of conduct such that the candidates stays at least for a period of one year.

iv.

Small companies can form some kind of a cooperative society wherein software
professionals' services can be tapped and steer clear and manpower shortage (less than
critical mass levels).

v.

The selection can be conditional that he acquires certified skills in the required areas either
through training in house or through approved training agencies and establishments. This
will also avoid the unnecessary expenses for (which are high) the candidates, who are
presently spending lot of money with a hope of employment. This will also ensure that
there is a focus on proper training and optimal deployment of time, effort and finances.

vi.

The selection process can thus be continuous and commensurate with the requirements
thus avoiding idle inventory.

vii.

There can be general norms of pay packages depending on the reputation of the
companies (classifying them as A, B, C, D by any reputed management institute like IIM
etc.) with the ratio of maximum pay within reasonable and realistic limits.

3.1.2

Post employment care:- The companies/organizations should take adequate interest in the
career development of the employee by suitable HRD approaches which should include
the following:
i.

Opportunities for creative work in the first phase particularly for those who are bright, and
have an aptitude and come with a good pedigree say from IITs.

ii.

Opportunities to lessen the monotony and improve interpersonal relationship and mixing
and group activities.

iii.

Periodic rotation of the rolls and jobs if possible.

iv.

Opportunities for retraining and upgrading the skills.

v.

Conducting effective career development programs regularly.

vi.

Incentives like ESOP, lucrative assignments and challenging projects, opportunities of

higher education.

vii.

Make the employee more versatile with wider perspective and flexible for easy
deployment in areas needing strengthening.

viii.
3.1.3

Encouraging simplicity and excellence.

Advantages:- The suggested processes in 4 and 5 above can be expected to have the
following significant advantages:

i.

Cost effective and efficient process.

ii.

Proper deployment of skills optimally.

iii.

Idle employment can be minimized.

iv.

Retention can be improved.

v.

Particularly useful for small firms which can also operate in the cooperative society mode.

vi.

The candidate's skills are moulded to suit the needs of the job and need not waste time,
money and efforts.

vii.

Equitable opportunities to all aspirants irrespective of location, pedigree and background.

viii.

Reduces the mushrooms of training shops with inadequate faculty.

ix.

This may also give the manufacturing and core engineering sector jobs reasonable chance
to attract willing and bright candidates.

x.

The process is ideally suited for candidates to plan their careers with adequate preparation
in core areas.

xi.

The process also enables a realistic assessments of needs and demands regularly and
meeting them even at short notices.

xii.

The aptitude tests can become richer and more representative over a few years and as the
question bank becomes larger and random on-line questioning can be introduced which is
more objective like GRE, GMAT

3.2
3.2.1

LONG TERM PERSPECTIVE

These tests can be conducted at the end of 10+2 level or B.Sc. level also and train the
candidate with or without stipend in courses where he could get admission for his
degree. This will help in decreasing the pressure on engineering education as otherwise
the skills acquired by the candidate at a great cost in branches other than computer
sciences are wasted and lost for good if employed by the software industry.

3.2.2

It may be a good idea to have a National Test for Software Talent similar to science talent
test which can be sponsored by NASSCOM and such other interested groups

3.2.3

The idea of forming a cooperative society by small firms may prove to be beneficial as the
facilities and manpower can be shared optimally. While otherwise they may face the
problems of lack of adequate manpower (below the critical mass level) because of less
attractive pay and perks they are able to offer.

3.2.4

Renowned organizations like IITs, IIMs and MNCs, and can play a catalytic roll in
streamlining the processes for an efficient HRD in this vital area of software
manpower which is a national resource.

CHAPTER - 4
IT SECTOR COMPENSATION METHODS
EMPLOYEE STOCK OWNWERSHIP PLAN
Employee Stock Ownership Plan(ESOP): is a defined contribution employee benefit plan that
allows employees to become owners of stock in the company they work for.

How does ESOP work?

The ESOP operates through a trust, setup by the company, that accepts tax deductible
contributions from the company to purchase company stock

The contributions made by the company are distributed to individual employee accounts
within the trust.

The amount of stock each individual receives may vary according to pre-established
formulas based on salary, service, or position.

The employees may cash out after vesting in the program or when they leave the
company. The amount they may cash out may depend on the vesting requirements.

STOCK OPTIONS

Stock Options: The right to purchase stock at a given price at some time in the future.
Stock Options come in two types:

Incentive stock options (ISOs) in which the employee is able to defer taxation until the
shares bought with the option are sold. The company does not receive a tax deduction
for this type of option.

Nonqualified stock options (NSOs) in which the employee must pay income tax on the
'spread' between the value of the stock and the amount paid for the option. The
company may receive a tax deduction on the 'spread'.

How do Stock options work? An option is created that specifies that the owner of the
option may 'exercise' the 'right' to purchase a companys stock at a certain price (the
'grant' price) by a certain (expiration) date in the future. Usually the price of the option
(the 'grant' price) is set to the market price of the stock at the time the option was sold. If
the underlying stock increases in value, the option becomes more valuable. If the
underlying stock decreases below the 'grant' price or stays the same in value as the
'grant' price, then the option becomes worthless.

MERIT PAY
Merit Pay is an incentive plan implemented on an institutional wide basis to give all employees
an equal opportunity for consideration, regardless of funding source. The merit increase
program is implemented when funds are designated for that purpose by the institution's
administration, dependent upon the availability of funds and other constraints. .

Advantages oF Merit Pay :

Allows the employer to differentiate pay given to high performers.

Allows a differentiation between individual and company performance.

Allows the employer to satisfactorily reward an employee for accomplishing a task that
might not be repeated (such as implementation of new systems).

GAIN SHARING
Gainsharing is a technique that compensates workers based on improvements in the company's
productivity.
How does Gainsharing work? A Company shares productivity gains with the workforce. Workers
voluntarily participate in management to accept responsibility for major reforms. This type of pay
is based on factors directly under a workers control (i.e., productivity or costs). Gains are
measured and distributions are made frequently through a predetermined formula. Because this
pay is only implemented when gains are achieved, gainsharing plans do not adversely affect
company costs.
What are the 'Gains' that are measured?

Increases in production with equal or less effort.

Equal levels of production with less effort.

What are examples of Gainsharing formulas?

Calculate gain in hours: The actual hours worked minus the expected hours (for the given level
of output) equals the gain in hours.

PROFIT SHARING
Profit Sharing is an incentive based compensation program to award employees a percentage
of the company's profits.
How does Profit sharing work? The company contributes a portion of its pre-tax profits to a pool
that will be distributed among eligible employees. The amount distributed to each employee
may be weighted by the employee's base salary so that employees with higher base salaries
receive a slightly higher amount of the shared pool of profits. Generally this is done on an
annual basis
How to Choose an Employee Stock Plan for Your Company:-Many companies we encounter
have a pretty good idea of what kind of employee ownership plan they want to use, usually
based on specific needs and goals. However, sometimes they might be better served by
another kind of stock plan. And yet others say they'd like to have an employee ownership plan,
but they're not sure what it might be. This article will start you down the path to choosing and
implementing the plan or plans best suited to your company.

ASSESSMENT OF PLANS FOR BROAD-BASED EMPLOYEE OWNERSHIP

Let us begin by quickly reviewing the main possibilities for broad-based employee ownership. A
"broad-based" plan is one in which most or all employees can participate.
An employee stock ownership plan (ESOP) is a type of tax-qualified employee benefit plan in
which most or all of the assets are invested in stock of the employer. Like profit sharing and
401(k) plans, which are governed by many of the same laws, an ESOP generally must include
at least all full-time employees meeting certain age and service requirements. Employees do not
actually buy shares in an ESOP. Instead, the company contributes its own shares to the plan,
contributes cash to buy its own stock (often from an existing owner), or, most commonly, has the
plan borrow money to buy stock, with the company repaying the loan. All of these uses have
significant tax benefits for the company, the employees, and the sellers. Employees gradually
vest in their accounts and receive their benefits when they leave the company (although there
may be distributions prior to that). Over 8 million employees in over 11,000 companies, mostly
closely held, participate in ESOPs.
A stock option plan grants employees the right to buy company stock at a specified price during
a specified period once the option has vested. So if an employee gets an option on 100 shares
at $10 and the stock price goes up to $20, the employee can "exercise" the option and buy
those 100 shares at $10 each, sell them on the market for $20 each, and pocket the difference.
But if the stock price never rises above the option price, the employee will simply not exercise
the option. Stock options can be given to as few or as few employees as you wish. Perhaps 7 to
10 million or more employees in thousands of companies, both public and private, presently
hold stock options.
An employee stock purchase plan (ESPP) is a little like a stock option plan. It gives employees
the chance to buy stock, usually through payroll deductions over a 3- to 27-month "offering
period." The price is usually discounted up to 15% from the market price. Frequently, employees
can choose to buy stock at a discount from the lower of the price either at the beginning or the
end of the ESPP offering period, which can increase the discount still further. As with a stock
option, after acquiring the stock the employee can sell it for a quick profit or hold onto it for
awhile. Unlike stock options, the discounted price built into most ESPPs means that employees
can profit even if the stock price has gone down since the grant date. Companies usually set up
ESPPs as tax-qualified "Section 423" plans, which means that almost all full-time employees
with 2 years or more of service must be allowed to participate (although in practice, many
choose not to). Many millions of employees, almost always in public companies, are in ESPPs.
Section 401(k) plan is a retirement plan that, unlike an ESOP, is designed to provide the
employee with a diversified portfolio of investments. Like an ESOP, however, a 401(k) plan is a
tax-qualified plan that generally must include all full-time employees meeting age and service

requirements. The employees can choose among several or more choices for investments, and
the company may make a matching contribution. Perhaps several million employees in a few
thousand companies participate in plans with a heavy company stock component; company
stock may be an investment choice for the employees and/or the means by which the company
makes matching contributions. 401(k) plans may be combined with ESOPs (these are called
"KSOPs"), where the company match is an ESOP contribution.

EMPLOYEE OWNERSHIP : COMPANIES PAY LESS FOR WORKERS'

COMPENSATION COSTS
A study has found that employee ownership companies have lower workers' compensation
insurance rates than comparable non-employee ownership firms. Leslie Hakala authored the
study. She began the project as an NCEO research intern and completed it for a thesis
requirement at Harvard University. The study was unable to ascribe a specific causal
relationship between employee ownership and lower workers' compensation costs, but it did
find that these costs declined as employee ownership plans matured.
Workers' compensation programs vary from state to state, but in most programs, insurers
attempt to provide employers with an incentive to limit safety problems by developing an
experience rating. The ratings compare an individual firm's experience with other firms of its
type. If the rating is better than average, insurance premiums will be lower; if it is worse, they
will go up.
In this study, we looked only at California firms. In California, employers are assigned a "manual
rate," an insurance rate expressed as a percentage of every $100 of payroll. Rates are
assigned to all companies based on their industry classification. These rates are then adjusted
for companies with a premium above a certain level according to their actual experience. This
means smaller and less risky firms are not assigned an experience modification rating. The
experience modification rate is set for each year based on three years of past experience,
excluding the most recent year (because data are generally not yet available). The experience
modification rate is determined by looking at actual experience modified by a size weighting
factor. For larger firms, the adjustment may be very small; for smaller firms, actual experience is
given a lower weight because a single incident can skew results dramatically. This weighted
experience rating now becomes the "experience modification" figure.
Theoretically, the average experience modification factor for any business classification should
be 100%. A company with a good record would have a rating under 100%; a bad record would
rate higher. These numbers are then multiplied by the manual rate to set the premium. In
practice, the average rating is somewhat under 100.

IT COMPANIES WRITE NEW ESOP STORY

Will I ever get to exercise my stock options? It's the one question haunting IT industry
professionals sitting on piles of employee stock options. All those who happily grabbed at
ESOP's issued by their companies last year, have now been left holding pieces of paper that
are, in some cases, worth a fraction of the price at which employees brought into them. Except
for a few who have benefitted from older schemes like Infosys 1994 scheme, the great ESOPs
dream is turning out to be a nightmare. Last year, if you were given ESOPs in an IT company,
your friends, neighbours and everyone else went up like a blimp, companies issued ESOPs in
cartloads. And employees brought into them, even at the higher prices that the grants came
from.
A year later, the situation's something like this. Employees who were given ESOPs at the prices
prevailing during the IT boom, had to sit back and watch their share prices hit the roof while they
waited out the lock-in period. Now, they can exercise their options that is sell them, and pocket
the difference between the exercise price at the time of the grant, and the current market price.
It's resulted in a situation where employees have been left holding NIIT options which they
would have to exercise at a price of Rs 1,593 or Silverline options, which they would have to
exercise at a price of $25. At VisualSoft, for instance, all employees who were granted options
have returned them to the company. Consequently, the company has terminated the ESOP
scheme.
Theoretically, an employee who exercised his option now, would have to buy at the exercise
price, sell at the current market price, and pay out the difference.

ESOPs HARDLY BENEFICIAL At the height of the IT euphoria in the markets, those employees saw their company's scrips
scaling new heights, they could not benefit as the ESOP's had 1-2 year lock-in periods, and
could not be sold. The lock-in period, also known as the vesting period in industry jargon, in the
period during which the employee cannot convert his or her option into shares. To make matters
worse, some companies has specified that the option had to be exercised, that is converted into
shares, within a specified time frame after the lockin period expired. For instance, this was one
year in the case of Silverline, and 10 in the case of Aptech.
Table 4.1
ESOP IN INDIAN CONTEXT

Recent ESOPs

No
of Plan
Shares
(Lakh)

Exercise
Plans

Vesting
Period

Current
Price

(Rs)

(Yrs)

(Rs)

NIIT

18.1

Aug '04

1,593

162

Silverline

10.0

Nov '04

425

1.5-3.5

41

Patni

5.5

Dec '04

245*

54

HCL Infosys

30.2

Aug '04

289

NA

72

SSI

1.5

Sep '04

555

164

Wipro

3.5

Oct '04

2,397

1-2

1,485

Infosys

19.6

Oct '04

6,249

3,532

VisualSoft

0.2

Aug '04

NA

116

Polaris

8.5

Aug '04

480

120

EMPLOYEE STOCK PURCHASE PLANS (ESPPS)

Employee stock purchase plans (ESPPs) include both tax-qualified "423 plans," which about
2,400 companies offer, and nonqualified plans, which about 1,500 companies offer. Our
estimates are based on data from ShareData's Equity Compensation Trends in America (1991),

Hewitt Associates' On Employee Stock Ownership (1996), Hewitt Associates' Survey Findings:
Employee Stock Purchase Plans (1998), and the National Association for Stock Plan
Professionals'Stock Plan Design and Administration Survey (1998), especially the more recent
studies. To estimate the number of employees covered under the plans, we took the total
number of companies offering plans, multiplied those numbers by the average number of
employees in the companies (13,207 for 423 plans and 17,790 for nonqualified plans), and
multiplied that number by the average percentage of participation in the plans (34% for 423
plans and 17% for nonqualified ESPPs). Almost all companies with ESPPs are public.
Multiple Plans: Many companies offer multiple e plans, and many employees participate in
more than one plan. For example, many ESPP participants are also in 401(k), stock option, or
other equity compensation plans. Hence, the total number of participants in all these plans is
definitely not the total of the numbers in the "Number of participants" column.
ESOPS AND CORPORATE GROWTH
Studies on participative management alone find a small positive impact on performance, but not
nearly enough to explain the synergy between ownership and participation these other studies
have found.

CHAPTER 5

SURVEY ANALYSIS OF HR TRENDS

5.0
5.0.1

SURVEY BACKGROUND
HR management gets best out of its employees to meet the organisation's goals.
And employees are the best judge of the HR policies of any organisations. IT
sector is fastly growing industry in India and HR requirements of Indian IT
Industry are quit different from traditional industrial sectors.., A

major

characteristic of modern socio-economic development has been the increasingly

dominant role of service sector .and IT belongs to service sector. So, its HR needs
must also be properly identified..
5.0.2

Indian IT sector is contributing a large in employment and foreign exchange. A

developing country like India can ill afford continued conflict ridden; rigid and
litigation oriented Industrial Relations. What employees perceive about the
emerging HR trends of the IT organisations has been measured.

5.0.3

To measure the success and failures of emerging HR trends of Indian IT Industry a

structured questionnaire was designed for this purpose. The questionnaire
included both open ended and close ended questions. The questionnaire used is
placed at Appendix "I". The procedure adopted for data collection

was

interview with the employees randomly selected from IT organisations to the

extent possible and also through mail. . The responses given by the respondents
were recorded on the questionnaire. The views expressed by the respondents has
been analysed in the succeeding paragraphs. About 100 respondents were selected
by convenient random sampling technique.

5.1

RESPONDENTS PROFILE

5.1.1

The main features of the employees randomly selected sex-wise,

education-wise and type of functions wise has been provided here in the
succeeding paras. The 54 per cent of the respondents were Male and 46 per
cent of the respondents were Female

5.1.2

IT industry requires higher level of education standards, both non-technical and

technical. The education qualification wise distribution of the employees who
agreed for responding to our questionnaire has been given below in Table 5.1.

Table 5.1
RESPONDENTS PROFILE - EDUCATION-WISE
(%age)
Respondents' Qualification

Non-Tech
Below

Graduate

and

Percentage Of
Respondents
11%

Non-Tech Post Graduate

23%

B.Tech/ BCA etc.

34%

MBA/MCA Etc.

32%

TOTAL

100%

5.1.3

In the similar fashion the job wise profile of the respondents has also
been compiled and the same is tabulated below in the Figure 5.2. As per Figure
the IT industry is dominated by the software professionals And next computer
hardware and marketing services of IT are sharing the other half. Only 13 percent
are working in HR and Personnel Management area. Hence, the HR needs of IT
industry must look after the software professionals at priority.

5.2
5.2.1

WHETHER HR NEEDS OF INDIAN IT INDUSTRY ARE

DIFFERENT
Through the Question No.2 of the questionnaire the respondents were asked to
comment whether the HR needs of Indian IT industry are different from traditional HR
Management systems. It was a direct question in Yes/NO/No comments format and IT
professionals selected for survey were asked to tick one of the choices as mentioned. The
responses have been tabulated in Table 5.3. The majority of respondents (69%) view that
HR needs of IT industry are different from old economy sector and HR managers in IT
industry has to keep this into mind. Being highly educated employees are very sensitive
in pride and behaviour.

TABLE-5.3
Emerging HR TRENDS OF INDIAN IT INDUSTRY
ARE DIFFERENT

(%age)
Respondents'
Observation

5.3
5.3.1

Percentage Of
Respondents

Yes

69%

No

23%

Can not say

08%

TOTAL

100%

EFFECT OF NEW COMPENSATION METHODS

The IT industry has been devising newer compensation methods like Profit
Sharing/ Stock Options etc. to increase employee welfare and retentively.
Whether these new compensation techniques are positively effecting or not
was the key point in our next question. As per Figure-5.4, 46% of the
employees opined that newer compensation methods has a positive effect in
IT industry while 19% said that it has a negative effect on employee
welfare. 26% view that it has no major effect and 9 percent has replied in
CAN NOT SAY. . In the initial stages when IT Industry was sunrise it was
mostly welcomed by the employees and when IT industry share prices has
gone down. It has a negative effect..

5.4 WHETHER IT INDUSTRY HAS POSITIVE

TOWARDFS ITS EMPLOYEES
5.4.1

ATTITUDE

In has been found that in many organisations the management ignores the
employees welfare for their profit sake and does not give proper attention towards

employees career and prospects. What is the state of affairs in IT Industry in India
was quizzed from our valued learned respondents. The respondents views are
given below Table 5.5. The results are mixed one. While 48% of the respondents'
replied in negative and 43% gave a positive reply. So, there is a profit motive
operating more than employees proper welfare management in Indian IT Industry.

TABLE - 5.5
WHETHER IT INDUSTRY HAS A POSITVE
ATTITUDE TOWARDS ITS EMPLOYEES
(%age)
Respondents'
Observation

Percentage Of
Respondents

Yes

43%

No

48%

No comments

09%

TOTAL

100%

5.5

STATE OF GRIEVANCES HANDLING IN INDIAN IT

INDUSTRY

5.5.1

The respondents responses to the status of grievances handling mechanism was

through an indirect approach. In the Question No. 5 of the questionnaire the
respondents were to comment upon the positive hypothesis that grievance

handling is done properly in the IT organisation. The five choices provided were
strongly agree, agree, no comments, disagree and strongly disagree. The data
collected is given below in Table-5.6.
TABLE - 5.6

GRIEVANCE HANDLING IN
INDIAN IT INDUSTRY IS PROPER
(%age)
Respondents'
Observation

5.5.2

Percentage Of
Respondents

Strongly Agree

12%

Agree

39%

No Comments

14%

Disagree

26%

Strongly Disagree

09%

TOTAL

100%

Only 12 respondents strongly agree to the statement and similarly a small number of
9 respondents strongly disagreed with this. Only 14 percent have nothing to
comment. 39 percent agree that The grievance handling IN Indian IT industry is
done properly and remaining 26 percent disagree with it.

5.6
5.6.1

TOP MANAGEMENT AWARENESS

Whether top management awareness about working conditions of the employees
and state of working conditions in the organisation was measured through next
question. Table-5.7 shows the response. 65% of the respondents view that the
top management's are not aware or little aware about the employees working
conditions in the IT organisations Only 6 percent vouched that top management
is very well aware about the nature of working conditions and 18 percent say
"Much Aware".

Table 5.7
TOP MANAGEMENT AWARENESS
(%age)
Respondents'
Observation

Percentage Of
Respondents

Not at all aware

20%

Very little aware

45%

Some what aware

11%

Much aware

18%

Very much aware

06%

TOTAL

100%

5.7

EMPLOYEE EMPLOYER RELATIONSHIP IN IT

INDUSTRY

5.7.1

Cordial employee employer relationship is very essential in the upcoming

highly competitive economy. The state of employee employer relationship
in Indian IT Industry was measured through the next question. The state
of employee-employer relationship is not very encouraging.

Table 5.8
STATE OF EMPLOYEE EMPLOYER
RELATIONSHIP IN IT INDUSTRY
(%age)
Respondents
Grading

5.7.2

Percentage Of
Respondents

Excellent

14%

Very Good

44%

Satisfactory

28%

Poor

14%

TOTAL

100%

58 percent of the respondents has graded it very good and above. While 42 percent
consider it satisfactory and below. The employment of modern technology
requires more positive and effective relationship between management and the

employees. Indian IT Industry has very effective employee employer

relationship.

5.8

EMPLOYEES
INDUSTRY

RETENTIVITY

IN

INDIAN

IT

5.8.1

The most of the employees of IT sector are highly educated and sensitive in nature.
Moreover, the opportunities outside are very attractive, Whether Indian IT
Industry is able to retain its employees was the next opinion query from the
randomly selected IT industry employees. Their opinions in this regard are
presented below in "YES/NO/NO COMMENTS" format in the Figure 5.9.

5.8.2

61% of the employees view that Indian IT companies are unable to retain its
employees due to most attractive avenues outside. Only 23% viewed that they
are able to retain the employees.

5.9

HOW TO INCREASE EMPLOYEES RETENTIVITY

IN INDIAN IT INDUSTRY

5.9.1

As has been observed in general and also concluded in previous paras that the IT
sector employees in India are very quickly jumping the employment. So, what the
employers has to do for retaining its professionals was asked from the
respondents. Few suggestions were listed and one column was open ended to
express their any other suggestion. The Table 5.10 list outs all the suggestions. I

TABLE- 5.10

SUGGESTIONS FOR INCREASE RETENTIVITY

IN INDIAN IT INDUSTRY
Respondents' Suggestions

Percentage Of
Respondents

Increase wages to international

levels

22%

Increase foreign postings

36%

Increase profit sharing

10%

More promotions

11%

Others

21%

TOTAL

100%
(%age)

5.9.2

A 22% of the respondents has suggested to increase the wages to

international level to increase employees retentively in Indian IT industry. 36%
want more foreign postings, 10% suggest increase profit sharing and 11%
suggested more promotions. 21% of the other suggestions included lateral
induction from lower the institutes and better HR management.

5.10

APPLICABILITY OF EXISTING INDIAN LABOUR

LAWS IN INDIAN IT INDUSTRY

5.10.1

"Existing Indian labour Laws/Rules are not strictly applicable to Indian IT

Industry as IT sector employees are quite different from general factory workers
and are well educated and trained. The separate Labour to whether as a Laws/Rules
should be designed for IT Industry:. This hypothesis was presented to the

respondents. They were to respond upto which extent they agree or disagree. The
employees responses have been tabulated below in the Table 5.11. The
comfortable majority of respondents (89%) strongly agree or agree with the

hypothesis that Indian IT sector requires separate labour management system/

regulations. While only minority of 13% has given divergent views. Low

TABLE-5.11
INDIAN IT INDUSTRY REQUIRE
SEPARATE LABOUR LAWS/ RULES
(%age)
Respondents'
Observation

5.11
5.11.1

Percentage Of
Respondents

Strongly Agree

57 %

Agree

32 %

No Comments

02%

Disagree

07%

Strongly
Disagree

02%

TOTAL

100%

EFFECTIVENESS
OF
OLD
METHODS IN IT INDUSTRY

AGITATIONAL

Whether IT industry can afford old traditional trade union methods of

agitations like Strike or Gherao etc. was also asked from the employees. The question

was direct in nature of Yes or No. As has been listed in Figure 5.12 below, 67% of the
respondents has given their reply in No and 28% answered in affirmative. 5% has ticked
No Comments choice. So, it is concluded that old agitational techniques of trade unions
are not desired in IT industry.

5.12

EFFECT OF EXCESSIVE COMPETION IN INDIAN IT

INDUSTRY

5.12.1

Whether excessive competition in Indian IT sector is harming the overall long term
prospects of employees in this sector The respondents opinion is tabulated below
in Table 5.13. The table above clearly indicates that excessive competition is
observed as harmful to the employees prospects. . 53 percent of the respondents
has replied in Yes to this question. While 35% has a negative viewpoint.

TABLE - 5.13
EXCESSIVE COMPETITION IS HARMING
EMPLOYEES LONG TERM WELFARE
(%age)
Respondents'
Observation

Percentage Of
Respondents

Yes

53%

No

35%

No Comments

12%

TOTAL

100%

5.13
5.13.1

ROLE OF TRADE UNION IN IT INDUSTRY

The respondents were asked to comment upon whether Indian IT Industry needs a
trade union or management's are looking after the employees interest in the best
possible manner. The Table 5.14 shows the responses in this regard.

Table 5.14
ROLE OF TRADE UNION IN IT INDUSTRY
(%age)
Respondents Grading

5.13.2

Percentage Of
Respondents

No Trade Union

21%

Single Trade Union

13%

Multi Trade Union

09%

Only welfare association

57%

Total

100%

The largest 57 percent of the respondents view that there should be only welfare
association in Indian IT industry. 21% need no trade union and 13% like single
trade union only.. 9 percent of the respondents opted for multi trade union.

5.14

OVERALL
ASSESSMENT OF EMERGING
TRENDS IN INDIAN IT INDUSTRY

HR

5.14.1

In the end respondents were asked to give their overall assessment/ grading of
emerging HR trends in Indian IT Industry. The overall assessment on five point
scales of excellent, very good, good, satisfactory and poor is tabulated below in
the Table 5.15. 65% of the respondents were in positive grading of excellent,
very good and good. While 35% gave a assessment of satisfactory and poor

CHAPTER - 6
SUMMARY AND CONCLUSION

6.0

OVERVIEW

6.0.1 The era of skill-based workers has arrived but if India wants to truly move to the global arena, it has
to spruce up its workforce. Small may be beautiful, but not in the IT industry. In the knowledge era and a
skill-based economy, it has become imperative that human resources become one of the most essential
ingredients of success. The growth of IT companies worldwide depends on its people and the intellectual
capital it possesses.
6.0.2 Knowledge workers has become a buzzword in todays IT scenario. And if we look at the top
software exporters, they have been growing phenomenally in workforce strength. To make it big in the
global software market, India needs to increase its mass of knowledge workers. The establishment of
Indian Institutes of Information Technology is definitely a step ahead in the right direction, but what the
industry needs is experts in niche areas, in other words, persons with domain expertise. In the era of
cutting-edge technologies, it is this skilled workforce that will make all the difference.
6.0.3 The total human resource strength of the IT industry as a whole stands at 425,609. A company-wise
break-up of this figure reveals that nearly 525 companies constituting 35% of the IT industry employ an
average of 58 persons each, 750 companies constituting 50% of the industry employ an average of 275
persons each, and 150 companies constituting 10% of the industry employ an average of 726 persons
each. At least 40 companies have more than 1,000 employees, while some very big companies like TCS,
Wipro, HCL and Infosys have staffs above 5,000 each.
6.0.4 Despite having abundant English-speaking skilled workforce, an acute shortage of skilled workforce
will affect the countrys software exports in the long run, if remedial actions are not taken immediately.
6.0.5 Geometrical growth of Information Technology in the world as well as India, has created lot of
revenues for government and number of avenues for employees. The introduction of computers has
changed the way of life every where, including work places and our homes. The life has become quite fast
and speed of provisioning of different services has also increased. But all this activities are being
managed by number of well qualified professionals. They may be from computer hardware developers,
software engineers or marketing managers. As the things are running fast, so they have to be managed
fast.
6.0.6 These fastness of services and higher level of education/training standards are not easy to manage
by the organisations concerned. As we already know that Human Resource Management of the
organisation deals with the individuals putting their hardwork to meet the organisations goals. Managing
people is the toughest element of any organisation than land, machinery or finances. Every human beings
has its own degree of preferences, likings and attitude. So, HR managers has to take care of all these
things in mind while dealing with the number of people working in the organisation.

6.0.7 Different type of employees/workers recruited for different level of working has to be managed in
different styles. The hundreds years of organisational management experience has been converted into a
standard personnel management and industry and service organisations are following these HR techniques
for their organisational management. Due to availability of written down procedures and rules by the
learned managers, it was felt that HR managing was not so typical.
6.0.8 But, emerging HR trends of Information Technology industry can not be managed properly by the
old traditional HR techniques . As it is commonly known that man learns by experience. 50 years of
introduction of computers has provided us the areas to be additionally addressed by the HR managers in
IT sector. Indian IT industry is not an exception. Moreover, due to existence of old conservative .and
protective labour laws it is not possible to meet the ever-growing international competition in the IT
services.
6.0.9 Hence, the IT industry has been devising newer Personnel Management/ HR techniques which
specifically meet the needs of IT industry. The main reason for this is high standards of education and
professional training required for this industry. Secondly, there is excessive job demands for developed
countries in this sector and high wage standards. So, HR managers mainly in developing countries like
India find it very difficult to retain and recruit their manpower. HR managers worldwide has devised
handsome compensation methods like Profit Sharing, Employee Stock Option Schemes ESOP etc.
Though over the period few schemes has flopped like ESOP due to heavy fall in company share prices.
6.1 RESPONDENTS OBSERVATIONS
6.1.1 As given out in Chapter 1, the employees opinion survey regarding status of HR management in
Indian IT Industry and success of emerging HR trends was conducted through the use of a structured
questionnaire. The survey was conducted by randomly selecting 100 persons working in Indian IT
Industry. The respondents observations in this respect are described in brief in the following paragraphs
6.1.2 The 54% of the were Male and 46 per cent of the respondents were Female. It was observed that IT
industry is dominated by the software professionals (46%), computer hardware and marketing services of
IT are sharing the other half.
6.1.3 The respondents were asked to comment whether the HR needs of Indian IT industry are different
from traditional HR Management systems.. The majority of respondents (69%) view that HR needs of IT
industry are different from old economy sector and HR managers in IT industry has to keep this into
mind.
6.1.4 The IT industry has been devising newer compensation methods like Profit Sharing/ Stock Options
etc. to increase employee welfare and receptivity. 46% of the employees opined that newer compensation

methods has a positive effect in IT industry while 26% said that it has a negative effect on employee
welfare.
6.1.5 As per 48% of the respondents IT organisation has more concern for profit motive than employees
welfare. While 43% were not agree to this proposition
6.1.6 51 percent of the respondents strongly agree/agree to the statement that grievance are handled
properly in the Indian IT industry. While 33% think otherwise.
6.1.7 Whether top management awareness about working conditions of the employees and state of
working conditions in the IT organisations, 65% of the respondents view that the top management's are
not aware or little aware about the employees working conditions in the IT organisations . Only 4 percent
vouched that top management is very well aware about the nature of working conditions and 16 percent
say "Much Aware".
6.1.8 Cordial employee employer relationship is very essential in the upcoming highly competitive
economy. The state of employee employer relationship in Indian IT Industry was measured through the
next question. The state of employee-employer relationship is very encouraging. 58 percent of the
respondents has graded it very good and above. While 42 percent consider it satisfactory and below.
6.1.9 Whether Indian IT Industry is able to retain its employees was the a query from the randomly from
IT industry employees. 61% of the employees view that Indian IT companies are unable to retain its
employees due to most attractive avenues outside . 22% of the respondents has suggested to increase the
wages to international level to increase employees retentivity in Indian IT industry. 36% want more
foreign postings, 10% suggest increase profit sharing and 11% suggested more promotions. 21% of the
other suggestions included lateral induction directly institutions and better HR management.
6.1.10 Existing Indian labour Laws/Rules are not strictly applicable to Indian IT Industry as IT sector
employees are quite different from general factory workers and are well educated and trained. The
separate Labour Laws/Rules should be designed for IT Industry:. This hypothesis was presented to the
respondents. The majority of respondents (89%) strongly agree or agree with the hypothesis that Indian IT
sector requires separate labour management system/ regulations. While only minority of 11% has given
divergent views. Further, 67% of the respondents has opined that old agitational techniques of trade
unions are not desired in IT industry.
6.1.11 Whether excessive competition in Indian IT sector is harming the overall long term prospects of
employees in this sector . 53 percent of the respondents has replied in Yes to this question. While 35
percent has a negative viewpoint..

6.1.9 The largest 57 percent of the respondents view that there should be only welfare association in
Indian IT industry. 21% need no trade union and 13% like single trade union only.. 9 percent of the
respondents opted for multi trade union.
6.1.10 In the end respondents were asked to give their overall assessment/ grading of emerging trends of
Indian IT industry. The overall assessment on five point scales of excellent, very good, good, satisfactory
and poor. 65% of the respondents were in positive grading of excellent, very good and good. While 35%
gave a assessment of satisfactory and poor
6.2 CONCLUSION
6.2.1 Hence, it can be concluded that Emerging HR trends of Indian It industry are quite different from
the old economy industry. India is considered one of Super Power in Information Technology and allied
fields. Majority of world leaders in IT sector are outsourcing their requirements from Indian IT Industry
and recruiting Indian IT professionals. Hence, the Indian Government must allow the Industry to meet
international competition and desired environment in respect of Labour Laws and financial rules must be
liberalized for this Indian IT Industry. Moreover, HR managers in Indian IT Industry must keep the
sensitive nature of IT professionals and state of greater opportunities outside in mind for devising HR
policies for their organisations China is also entering this area vigorously and Government of India must
help Indian It industry to meet this challenge.
APPENDIX "I"
QUESTIONNAIRE FOR
PROJECT STUDY ON EMERGING HR TRENDS
IN INDIAN IT INDUSTRY
Dear Sir/Madam,
I am a management student of Fore School of Management. As part of course I a undertaking this project
study. I would a request you to kindly answer a few questions. This questionnaire gives you the
opportunity to express your opinion regarding various aspects of emerging HR trends in Indian a new IT
Sector.
As a a you are all aware that Information Technology (IT) industry is achieving a great success in Indian
employment context. As you are to a part of IT industry and must be observing that the HR trends of IT
sector are quite different from the conventional old economy sectors.

The results shall be submitted to the university in the report format for the usage of researchers and other
concerned authorities. As is the case for entire study, no individual will be identified. Only group averages
will be reported.
Thanking You
Date .....
Personal Profile of the Respondent
1.

(a) Place of survey..................................

(b) Name.............................................
(c) Address...........................................
(d) Male/Female.......................................
(e) Educational qualifications:
(i) Non Tech Graduate or below
(ii) Non-Tech Post-Graduate
(iii) B.Tech/BCA etc.
(iv) M.Tech/MCA/MBA
(f) Your Nature of Job:
(i) Computer Hardware
(ii) Computer Software
(iii) Marketing Services of IT
(iv) HR/ Personnel management
2. Whether you feel that HR needs of Indian IT sector are different from old HR practices.(Please Tick)
(i) Yes

(ii) No
(iii) Can Not Say
3. Whether new compensating methods being adopted by the various IT companies are positively
effecting the employees welfare?
(i) Positive Effect
(ii) Negative Effect
(iii) No Effect
(iv) Can Not Say
4. "Indian IT sector companies has a positive attitude towards its employees and are not neglecting their
welfare and prospects for their profit sake." Do you agree with the statement.
(i) Yes
(ii) No
(iii) No Comments
5 "The grievances of the employees in Indian IT sectors are handled properly". To what extent do you
with this statement.
(i) Strongly Agree
(ii) Agree
(iii)No Comments
(iv) Disagree
(v) Strongly Disagree
6. How much do you think the top management of your organisation is aware of the working conditions
of its employees?
(i) Not at all aware

(ii) Very little aware

(iii) Somewhat aware
(iv) Much aware
(v) Very much aware
7. What is the state of employee employer relationship in Your Organisation
(i) Excellent
(ii) Very Good
(iii) Satisfactory
(iv) Poor
8. The most of the employees of Indian IT sector or highly educated and sensitive in nature. Moreover,
the opportunities outside are very attractive, Whether Indian IT Industry is able to retain its employees.
(Please Tick)
(i) Yes
(ii) No
(iii) Comments
9. What the HR managers of Indian IT sector should do to increase the retentivity rate of its employees
(Please Tick)
(i) Increase wages to international level
ii) Increase foreign postings
iii) Increase profit sharing
(iv) More promotions
(v) Any other(please specify) __________________________

10. "Existing Indian labour Laws/Rules are not strictly applicable to Indian IT Industry as IT sector
employees are quite different from general factory workers and are well educated and trained. The
separate Labour Laws/Rules should be designed for IT Industry:. Do you agree with this proposition.
(i) Strongly Agree
(ii) Agree
iii) No Comments
(iv) Disagree
(v) Strongly Disagree
11. Whether old methods of employees association/trade union like strike or Gherao etc. are desirable
in Indian IT Sector (Please Tick)
(i) Yes
(ii) No
(iii) No Comments
12. In your view whether excessive competition in Indian IT sector is harming the overall long term
prospects of employees in this sector.
(i) Yes
(ii) No
(iii) No Comments
13. Whether do you feel there is any roll of trade union in the IT Industry?
(i) No Trade Union
(ii) Single Union
(iii) Multi Union
(iv) Only welfare association

(iv) Can not say

14. Give your overall assessment of HR Management in Indian It Industry.
(i) Excellent
(ii) Very Good
(iii) Good
(iii) Satisfactory
(iv) Poor
15. Please give your comments and suggestions to bring further improvement in HR Management in
Indian IT Industry.
Thank You,

B I B LI O G R APH Y
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Employment, Australia, 1982.
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