Bleak year for IT hiring with Big Four at multi-year lows

India’s freshly graduating tech talent as well as entry- to mid-career employees are staring at a bleak immediate future as the country’s top tech recruiters pull back on new hiring.

In the first three quarters of FY24, Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and Wipro Ltd saw a collective decline of 49,936 employees, showed data collated from quarterly and annual financial reports by Mint. It’s the worst decline in headcount at the ‘Big Four’ information technology (IT) services companies in at least five years, Mint’s analysis shows.

This drop in hiring has come off the back of global macroeconomic uncertainties that have hammered India’s $245 billion IT services industry.

The drop also comes two years after a record FY22, when pandemic-induced demand for digital transformation among industries saw India’s top four software exporters add over 300,000 employees.

Industry experts and analysts say fresh graduates will struggle to find jobs at least until the end of this calendar year, while the immediate aftermath of this could lead to another cycle of rising attrition levels at IT firms.

Infosys and Wipro have announced that they will skip campus recruitments at least until the end of this ongoing quarter.

“This is the first time since FY19 that the companies are looking to skip campus recruitment,” said Prasadh M.S., head of workforce research and analytics at workplace statistics firm Xpheno.

The current drop in headcount is in tandem with a decline in overall revenue and profitability of big IT companies. At the end of the December quarter, HCL Tech was the only company among the top four to have posted any meaningful growth, with dollar revenue and net profit rising 5.9% and 12.5% sequentially.

“The Big Four and some of their peers are the only cohort that can spend on building talent for the overall industry. Simply put, onboarding 10,000 employees means adding at least ₹400 crore as employee cost for a company—not many companies can do this,” said Prasadh. “As a result, when the Big Four do not go to campuses, the talent supply for India’s entire tech hiring demand gets constricted.”

As a result, Prasadh said, any non-tech firm looking for tech talent will now need to look at lateral hires from other companies, which in turn will lead to higher costs incurred as the average cost of hiring will go up.

Sunil Chemmankotil, chief executive officer (CEO) of staffing services firm Teamlease Digital, added that the influx of generative AI (artificial intelligence) has coincided with IT services firms experimenting with ways to improve their margins and efficiencies.

“Typically, these IT firms were dependent on fresher hiring because a lot of entry-level hires would be first trained on basic tasks. The slowdown in fresher recruitments has also been a factor of the influx of AI and generative AI, which has led to a confusion in terms of how AI will intervene.”

The key reason for the hiring slowdown was reflected in commentaries by the IT companies during their third-quarter results.

Each of the Big Four CEOs said that the overall sentiment among clients across various industries remained cautious, and discretionary spending by clients was minimal.

Debashis Chatterjee, CEO of IT services firm LTIMindtree Ltd, told Mint on 18 January that furloughs in tech spending had also affected even those sectors typically considered to be inflation-proof, such as oil and gas. TCS CEO K. Krithivasan told Mint on 14 January that there were no major changes to the overall demand environment.

Discretionary deals are key growth contributors for the IT services industry. These deals typically allow software exporters to claim higher margins, and are indicators of a healthy demand environment where clients are not cautious or conservative spending on tech projects.

Apurva Prasad, vice-president of institutional research at HDFC Securities, told Mint on 15 January that demand for tech projects among clients is unlikely to change at least until the second half of FY25.

As the market revives, some industry experts say a second round of attrition surge could be in order. “As the market opens up, there will be a surge in demand for tech jobs. The industry is likely to see a second surge in attrition, which could yet again lead to a cycle of higher salaries,” Prasad said.