Waning demand for IT services hits hiring at Indian tech majors

By Sethuraman N R

BENGALURU (Reuters) – India’s top IT service providers are going slow on hiring as clients cut back spending and defer projects due to macroeconomic challenges, in a U-turn from the excesses of the past few years made in anticipation of further growth.

Tata Consultancy Services, Infosys and HCLTech have seen employee headcount reducing in the second quarter as they reported weak results. Infosys and HCL trimmed their full-year revenue outlook.

“Firms overhired in 2021-2022 in anticipation of further growth this year, which has not materialized, and there is a big emphasis from most service providers to utilize their current workforces,” said Phil Fersht, CEO of U.S. IT advisory HFS Research.

A slowdown in campus hiring – the mainstay employee resource of the Indian IT industry which has build its niche on being able to appoint throngs of engineers on various client projects – began in the April-June quarter and has accelerated since, triggering fears of a hit to the economies in the U.S. and UK.

Analysts have said they do not see demand for IT services returning anytime soon, reinforced by muted hiring trends across the top IT firms, as clients cutting discretionary spending after a pandemic boom.

Infosys added over 83,000 employees in the last two fiscal years, while TCS’ employee headcount surged by over 120,000 and HCL added about 57,000.

In contrast, Infosys’ net employee headcount has fallen by 14,470 in the first half of this year and HCLTech’s by about 4,800. TCS’ net employee reductions stood at 5,810 in the same period.

Many have held off, or are revisiting plans on recruiting from colleges and working on improving employee utilization, or the number of billable working hours for an employee.

“In a way we hired ahead of demand predicted … with that slowing down this year, our employee utilization fell. We still have a significant fresher bench with us and room for utilization improvement,” Infosys chief financial officer Nilanjan Roy said during the earnings media conference.

Infosys is targeting 84%-85% in employee utilization from the current 81.8%, Roy said.

(Reporting by Sethuraman NR and Navamya Acharya in Bengaluru; Editing by Nivedita Bhattacharjee)