An upward curve in demand for engineering, research and development (ER&D) services is boosting hiring prospects in the space by around 15% when recruitment in general continues to remain soft in India’s $250 billion IT services industry.

According to data from staffing firms, technology services providers are poised to ramp up ER&D recruitments to sustain and enhance their global competitive edge.

“In FY24, there was a robust increase in hiring within the ER&D sector, marking a 10-15% rise compared to FY23 … Looking ahead, for FY25, we anticipate 12-15% growth in demand for ER&D professionals,” said Aditya Narayan Mishra, managing director and chief executive at recruitment firm Ciel HR Services.

Technology services companies want to have full-stack solutions and offerings as digital has a significant component of engineering services. Also, with the disruption caused by generative artificial intelligence, there has been a rush of software service providers including Infosys, Cognizant, Wipro and even smaller IT companies like Coforge, Happiest Minds Technologies and Xoriant to acquire pure-play ER&D firms to expand their capabilities, in turn also increasing competition in the segment.

Between FY19 and FY24, hiring in the ER&D sector had risen by about 40-50%, Ciel data showed.

“ER&D will need key future digital and industrial skills to meet the demand of sourcing moving to India,” said Munira Loliwala, vice president – strategy & growth at staffing firm Teamlease Digital.

There is currently a demand-supply gap of 41% in digital skills and 22-25% in industrial skills and demand is increasing in small cities as well, said Loliwala.

The talent demand is not just from India’s outsourcing firms, but also due to India’s increasing share in global R&D with multinational firms expanding their global capability centres (GCCs) here. Teamlease Digital pegs India’s share in R&D spending to be nearly 22% by 2030, up from 17% in 2023. Software, automotives and semiconductors will constitute almost 60% of the share of ER&D by 2030, it said.

“With the emergence of AI & Gen AI skills, ER&D will need different skills in the future from the present ones; upskilling and reskilling will be critical to this sector. With the rise of 40% ER&D GCCs in the last two years employing 0.7 million people, GCCs in ER&D are expected to increase hiring by 15-20% within the next two years,” Loliwala said. “Outsourcing and offshore hiring will help address shortages in digital engineering capabilities that are in the highest demand, such as data engineering and analytics, cybersecurity and Internet of Things (IoT).”

The talent employed at GCCs is at the higher end of the spectrum and comes at a premium over many other engineering jobs.

With notable spikes in hiring for specialised roles, Mishra said AI and machine learning specialists have seen a 20-25% increase in demand, driven by the urgent need for digital transformation and innovative solutions.

Conversely, roles like traditional mechanical and basic electrical engineers saw modest growth rates of 3-5% and 4-6%, respectively. In March, ET had reported that while there was an increase in demand for talent, staffing firms were projecting actual hiring to increase only 7-8% in the second half of this calendar year with campus hiring at a two-decade low.

This slow increase can be attributed to the industry’s shift towards advanced digital skills and automation, which are reshaping traditional engineering roles, the staffing experts say. “As companies prioritise cutting-edge technologies and digital advancements, the demand for these foundational engineering roles has remained relatively stable compared to their more specialised counterparts in AI, cybersecurity, and data analytics,” Mishra added.

“The rise in ER&D hiring numbers stems from several critical factors. Firstly, the model of carrying out R&D activities in India has been proven beyond doubt. Quality of talent in India has been proved time and again to be no less than world-class and secondly, such best-in-class talent has remained available. We have success stories of ER&D centres of global majors across the world based out of India across a range of industry sectors such as aviation, automobiles, auto-components, manufacturing, construction, chemicals, pharmaceuticals and many more,” he further said.

“GCCs emphasise acquiring specialised skills, particularly in ER&D, offering long-term prospects and exposure to emerging technologies like AI, which traditional IT vendors may not provide. These factors make GCCs an attractive option for professionals seeking career growth, better pay, and exposure to the latest technological advancements,” said Mitalee Dabral, country HR leader at Wayfair India’s technology development centre (TDC).

Last year, US-headquartered home furniture retailer Wayfair entered the Indian market to open its TDC in Bengaluru and since has actively invested in upskilling its workforce in India to take on more complex and critical functions within the organisation.

Moreover, attrition in ER&D roles have spiked to 16-18%, resulting in large replacement hiring.

Gig workforce will help fulfil the gaps in IT and digital engineering skills to a large extent in the coming years, Loliwala noted.

An upward curve in demand for engineering, research and development (ER&D) services is boosting hiring prospects in the space by around 15% when recruitment in general continues to remain soft in India’s $250 billion IT services industry.

According to data from staffing firms, technology services providers are poised to ramp up ER&D recruitments to sustain and enhance their global competitive edge.

“In FY24, there was a robust increase in hiring within the ER&D sector, marking a 10-15% rise compared to FY23 … Looking ahead, for FY25, we anticipate 12-15% growth in demand for ER&D professionals,” said Aditya Narayan Mishra, managing director and chief executive at recruitment firm Ciel HR Services.

Technology services companies want to have full-stack solutions and offerings as digital has a significant component of engineering services. Also, with the disruption caused by generative artificial intelligence, there has been a rush of software service providers including Infosys, Cognizant, Wipro and even smaller IT companies like Coforge, Happiest Minds Technologies and Xoriant to acquire pure-play ER&D firms to expand their capabilities, in turn also increasing competition in the segment.

Between FY19 and FY24, hiring in the ER&D sector had risen by about 40-50%, Ciel data showed.

“ER&D will need key future digital and industrial skills to meet the demand of sourcing moving to India,” said Munira Loliwala, vice president – strategy & growth at staffing firm Teamlease Digital.

There is currently a demand-supply gap of 41% in digital skills and 22-25% in industrial skills and demand is increasing in small cities as well, said Loliwala.

The talent demand is not just from India’s outsourcing firms, but also due to India’s increasing share in global R&D with multinational firms expanding their global capability centres (GCCs) here. Teamlease Digital pegs India’s share in R&D spending to be nearly 22% by 2030, up from 17% in 2023. Software, automotives and semiconductors will constitute almost 60% of the share of ER&D by 2030, it said.

“With the emergence of AI & Gen AI skills, ER&D will need different skills in the future from the present ones; upskilling and reskilling will be critical to this sector. With the rise of 40% ER&D GCCs in the last two years employing 0.7 million people, GCCs in ER&D are expected to increase hiring by 15-20% within the next two years,” Loliwala said. “Outsourcing and offshore hiring will help address shortages in digital engineering capabilities that are in the highest demand, such as data engineering and analytics, cybersecurity and Internet of Things (IoT).”

The talent employed at GCCs is at the higher end of the spectrum and comes at a premium over many other engineering jobs.

With notable spikes in hiring for specialised roles, Mishra said AI and machine learning specialists have seen a 20-25% increase in demand, driven by the urgent need for digital transformation and innovative solutions.

Conversely, roles like traditional mechanical and basic electrical engineers saw modest growth rates of 3-5% and 4-6%, respectively. In March, ET had reported that while there was an increase in demand for talent, staffing firms were projecting actual hiring to increase only 7-8% in the second half of this calendar year with campus hiring at a two-decade low.

This slow increase can be attributed to the industry’s shift towards advanced digital skills and automation, which are reshaping traditional engineering roles, the staffing experts say. “As companies prioritise cutting-edge technologies and digital advancements, the demand for these foundational engineering roles has remained relatively stable compared to their more specialised counterparts in AI, cybersecurity, and data analytics,” Mishra added.

“The rise in ER&D hiring numbers stems from several critical factors. Firstly, the model of carrying out R&D activities in India has been proven beyond doubt. Quality of talent in India has been proved time and again to be no less than world-class and secondly, such best-in-class talent has remained available. We have success stories of ER&D centres of global majors across the world based out of India across a range of industry sectors such as aviation, automobiles, auto-components, manufacturing, construction, chemicals, pharmaceuticals and many more,” he further said.

“GCCs emphasise acquiring specialised skills, particularly in ER&D, offering long-term prospects and exposure to emerging technologies like AI, which traditional IT vendors may not provide. These factors make GCCs an attractive option for professionals seeking career growth, better pay, and exposure to the latest technological advancements,” said Mitalee Dabral, country HR leader at Wayfair India’s technology development centre (TDC).

Last year, US-headquartered home furniture retailer Wayfair entered the Indian market to open its TDC in Bengaluru and since has actively invested in upskilling its workforce in India to take on more complex and critical functions within the organisation.

Moreover, attrition in ER&D roles have spiked to 16-18%, resulting in large replacement hiring.

Gig workforce will help fulfil the gaps in IT and digital engineering skills to a large extent in the coming years, Loliwala noted.