BENGALURU: Top three Indian IT services companies in terms of revenues- Tata Consultancy Services (TCS), Infosys and HCLTech, cumulatively reduced their workforce by 25,000 in the first six months of this fiscal year.
In Q2 alone, these companies reported a decline of 16,162 employees, indicating client decision-making delays and macroeconomic headwinds. These companies have started utilising the existing talents and upskilling them with emerging technologies such as Gen AI.
“The current drop in headcount is a flab shedding and load balancing activity that enterprises are carrying out amidst margin pressures,” Kamal Karanth, co-founder of staffing firm Xpheno, said. Services sector is facing headwinds from lower global tech spends of large consumers and discretionary spend on technology remaining low. While new order pipelines have been booked, a lag in the revenue and returns are a setback for services players, he added.
While Infosys said they are not going to campuses for fresher hiring, HCLTech said a lot of freshers they hired in the past are now ready to be deployed. Attrition rate has dropped in the last six months from about 20% to 14% as of September 2023, and companies are also not backfilling attrition.
“Given the near-term margin pressures, dropping costs and increasing utilisation rates are key for large employers. This dual correction much needed to go past the current and near-term adversity necessitates headcount corrections and resiing of the workforce. The sector is in a phase of corrective and cautionary optimisation of headcounts to protect margins and avert high burn rates,” Karanth said.
Prospective campus recruitment activities could be impacted during the subsequent quarter, mainly due to project cancellations and an unpredictable demand landscape, as reported by an IT giants during Q2 result, said NLB Services. Are AI and automation playing a role in this reduction?
Karanth said these are not drivers of the current headcount reduction, as internally enterprises have some distance to cover on operating maturity that can eliminate headcounts in high volume. “The fact that per person productivity ratios measured in terms of people cost to revenue has not grown much since the AI and automation initiatives were introduced. The ability to replace headcounts can only be achieved when this per capita productivity multiplies and stays consistent,” he added.
