Tech workers had a gloomy year; will things get better?

Infosys and Wipro, together accounted for 46,057 or more than half of the total reduction in workforce at the largest companies, according to an analysis by Mint. (Mint)
Infosys and Wipro, together accounted for 46,057 or more than half of the total reduction in workforce at the largest companies, according to an analysis by Mint. (Mint)

Summary

  • Last week, Nasscom said that the country’s technology industry is expected to grow 3.8%, the slowest full-year growth, to $253.9 billion in the year ending March.

Mumbai and Bengaluru: Headcount at India’s top 10 IT firms employing a combined two million people fell by 76,572 last year, as companies retrenched workers in the face of a slowdown.

According to staffing firms and job portals, hiring is not expected to pick up soon either, amid muted demand for technology services and rising fears of artificial intelligence eating into existing jobs.

Hitesh Oberoi, CEO of Info Edge India Ltd, which operates Naukri.com, said IT services companies went on a hiring binge during the two pandemic years, but a subsequent slowdown forced them to trim down.

“We didn’t see any recovery in Q3. IT hiring was slow in Q3 as well. What we’ve been seeing for the last three quarters now is a serious slowdown in IT hiring," said Oberoi in a post-earnings interaction with analysts on 13 February. “They’ve (IT services firms) not been adding new people. In many cases, they’ve been letting people go."

Oberoi’s acknowledgment of retrenchment is the first comment by a boss of a job portal, a subject that none of the companies admit to. It is also significant because staffing firms and job portals including Naukri, Quess Corp and TeamLease Ltd are the first to offer people a role with companies in good times, making their commentary and performance a good leading indicator of the health of the sector.

Infosys Ltd and Wipro Ltd, the Bengaluru-based twins, together accounted for 46,057, or more than half of the total reduction in workforce at the largest companies, according to an analysis by Mint. HCL Technologies Ltd, Persistent Systems and L&T Technology Services Ltd were the three companies that bucked the trend and ended last year with more employees than they started in 2023.

Queries emailed to Tata Consultancy Services, Cognizant, Infosys, Wipro, Tech Mahindra, LTI Mindtree and Mphasis seeking comment went unanswered.

“This is the phase-one correction where IT services firms are letting go of junior and middle management," said Sunil Chemmankotil, chief executive officer for TeamLease Digital.

“More than 60,000 have been let go of by the top 5 IT firms. The clients now want technology-driven services which means less human interface. IT firms are also facing resistance to their policy of asking employees to come back to offices. Those who are unwilling are being asked to go," Chemmankotil added.

Naukri’s Oberoi seemed uncertain about how recruitment will pan out in the IT sector.

“Right now, our IT growth is negative. It’s down may be 5%-6% year on year," said Oberoi. “Of course, we had a very good two years before this, and the IT business grew by more than 100% back then. But in the process, I suspect IT companies also over-hired. And now because demand is soft, they sort of have some extra manpower," said Oberoi. “What is likely to happen in Q4, hard for me to say."

TeamLease and Quess Corp also shared a dull outlook for the sector. “I think the demand still stays quite muted," Ashok Reddy, co-founder and managing director of TeamLease Ltd, said in a post-earnings call with analysts on 30 January. “The services companies are still, at best, replacing attrition but not bringing new demand to the table."

“The Indian IT staffing and collection business continues to remain impacted by global headwinds," Quess Corp CEO Guruprasad Srinivasan said in an analyst interaction on 5 February. “Current open mandates stand at approximately 1,200, a drop of 16% quarter-on-quarter and 31% year-on-year."

The IT services industry has been grappling with slowing growth, as clients cut back on discretionary spending amid high interest rates and military conflicts in Ukraine and West Asia. Simultaneously, the rise of disruptive technologies such as generative artificial intelligence (AI) have raised fears that much of the work done by engineers now will be automated, posing an existential threat to the country’s $245 billion outsourcing industry.

Last week, IT industry body Nasscom said that the country’s technology industry is expected to grow 3.8%, the slowest full-year growth, to $253.9 billion in the year ending March 2024.

Still, the sombre commentary from staffing firms is in contrast to the upbeat investor sentiment. Shares of TCS, Infosys, HCL, and Wipro are up 6.2%, 8%, 12.1%, and 12%, respectively, between 1 January and 23 February, outperforming the 30-share Sensex, which was up just 1.2% during this time.

To compensate for the slowdown in demand from IT services firms, staffing firms are deploying job-seekers to banks, retailers and manufacturing firms. TeamLease claims that 66% of its revenue comes from deploying people to Global Capability Centres or GCCs. Still, all the firms have seen their growth take a hit on account of less business from the IT services segment.

Quess Corp.’s revenue expanded 8% year-on-year to 4,842 crore in the October-December period. Revenue at TeamLease totalled 2,445.36 crore in the quarter, a 21.7% jump from the year-ago period, while Naukri’s revenue rose 3.1% year-on-year to 450 crore.

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