Indian IT Services Companies Witness Sharpest Contraction in Headcount Q1 Earnings Report
A Challenging Start for Indian IT Giants: Headcount Contractions and Slowdown in Projects Raise Concerns
In a stunning turn of events, six top Indian IT services companies have reported a substantial fall in their workforce during the first quarter of the financial year. According to data produced by Xpheno, a famous HR analytics firm, aggregate staffing at Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, LTIMindtree, and L&T Technology Services (LTTS) contracted by a stunning 18,000, the greatest decline in the last three years. This result is considerably worse than the negative 9,000 headcount reported in the same quarter of 2021, which occurred during the peak of the pandemic.
The few glimmers of promise amid this slump were spotted at TCS and LTTS. TCS, being the country’s largest IT company, managed to gain 523 personnel, while LTTS experienced an addition of 1,159 during the same period. However, even tiny positive movements offer little relief as four out of the six corporations faced deep red figures in net headcount change, signifying a difficult start to FY24.
The IT sector is currently coping with the implications of the slowdown in projects. Consequently, Infosys, one of India’s top IT businesses, has lowered its revenue growth prediction for FY24 to 1-3.5% in constant currency terms, down from the earlier projection of 4-7%. This adjustment comes as no surprise as clients have been slowing down or even discontinuing transformation programs and discretionary work in the short term, as noted by Infosys CEO, Salil Parekh, during the announcement of the Q1 results.
While attrition rates have been gradually dropping during FY23, the six organizations together managed to bring it down to 17.6% in the June quarter, compared to 20.4% in the March quarter and 23.7% in the previous year. Although this decline is a positive sign, HR experts caution that it still remains above the ideal range of 13-14% for the IT services cohort.
Interestingly, despite the market’s slow pace, talent in the IT services sector seems to have found a way to keep moving, with nearly a quarter of employees switching employers in the past 12 months, according to the Xpheno talent movement monitor. This practice has contributed to a decline in overall headcount at Infosys, HCLTech, and Wipro, with losses of 6,940, 2,506, and 8,812 people, respectively.
As the rest of the year looms ahead, human resource professionals believe that it will generally stay routine, including the recruitment of freshers. This is owing to the drop in attrition and corporations electing to slow down on hiring fresh talent, instead choosing to actively deploy benched staff.
The decrease in headcount growth can be ascribed to corporations’ prior assumption of a boom in IT agreements from the end of 2021 to 2022. Unfortunately, those hopes didn’t materialize, and the industry is now faced with obstacles to navigate through the uncertainty.
In conclusion, the first quarter’s financial report of Indian IT services companies reveals a significant reduction in headcount. While a number of organizations managed to buck the trend with tiny staff growth, the general picture remained dismal. As the market grapples with project slowdowns and decreasing attrition, organizations are adopting cautious tactics for the future. The impact of these problems will likely be felt throughout the rest of FY24, making it a key period for the Indian IT services sector to adapt and develop.