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Business News/ Industry / Infotech/  Bench strength playing a key role at IT firms
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Bench strength playing a key role at IT firms

Over the next two quarters these firms will focus heavily on employees who have not yet been assigned a project, with work barely trickling in and external hiring putting pressure on finances

Companies are also increasing their investments in training the bench to minimise the need for lateral hiring (Photo: Reuters)Premium
Companies are also increasing their investments in training the bench to minimise the need for lateral hiring (Photo: Reuters)

Mumbai: India’s top IT service companies such as TCS, Infosys, Wipro and HCL are strategically streamlining their bench strength to stabilise resource utilisation rates. Over the next two quarters the firms will focus heavily on the bench, with projects barely trickling in and external hiring putting pressure on finances. They are also increasing their investments in training the bench to minimise the need for lateral hiring.

“Teams having global capability centres and banking and financial services clients who are based in the US are maintaining their bench strength. There is demand for hiring for the reserves, but if clients are based out of Europe, and Australia then vacancies on the bench are not getting filled," said Sunil Chemmankotil, chief executive of staffing firm TeamLease Digital. According to Chemmankotil’s estimates, 10-12% staff of an IT firm is on reserve.

Utilisation rate indicates the percentage of staff engaged in active projects, while the “bench" consists of staff who have not yet been assigned a project. Campus recruits still undergoing training for specific skill sets are on the bench until they are ready to join teams. Additionally, individuals between projects, or those undergoing performance evaluation, may find themselves “benched’.

Utilisation rates for Infosys and Wipro are showing signs of a recovery following a dip in 2022. In April-June, Infosys’ utilisation rate rose from 80% in January-March to 84.7%. Similarly, Wipro’s utilisation rate climbed to 83.7% from the lows of 79.7% in October-December. While TCS and HCL do not disclose their utilisation rates, industry experts expect these firms to tap into their reserves to deploy more personnel on projects while keeping costs in check.

“There will be training in AI for those on the bench since there is no clarity on new order pipelines and companies need to be ready when the projects come," Akshara Bassi, senior research analyst Counterpoint Research, said. Bassi expects utilisation rates in IT firms to increase as companies will try to get more hands on deck and keep the reserve strength lean.

A reason for focussing on reserves is rising employee cost. According to a Mint analysis, wage costs as a share of revenue rose for TCS, HCL and Wipro in April-June, to reach their highest levels in at least five years, suggesting that the firms were relying more on expensive lateral hires. However, second quarter earnings of TCS show a fall in wage costs as a share of revenue . HCL and Infosys will announce its second quarter results on Thursday, Wipro’s is likely to do so on 18 October.

However, recruiters such as Prasadh M.S., head of workforce research and analytics at Xpheno, said pushing utilisation rates up can be detrimental for a firm. “The capacity of reserve needed to show clients that they can take more deals will be restricted if there is not enough bench strength."

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ABOUT THE AUTHOR
Devina Sengupta
Devina tracks and writes on workplaces, human resources and education for Mint. She also occaisionally writes an opinion column. She hosts a podcast on interesting HR trends in corporate India called The Working Life.
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Published: 12 Oct 2023, 09:55 AM IST
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