Wary IT companies may halve hiring of engineers from April: Experts

Net hiring of engineers by the Indian IT companies is likely to crash by close to half year on year in the next fiscal amidst rising caution among companies, hiring firms have told ET.

Staffing firm TeamLease expects a 40% drop in FY24 headcount addition vis a vis FY23 addition, based on the current outlook from companies.

“So far in FY23, there has been a net headcount addition of about 280,000 (across the IT sector) and Q4 addition is likely to remain flat,” said Sunil C, CEO of TeamLease Digital. “In recent quarters, attrition has gone down and growth visibility has also reduced. So, we would expect a 30%-40% drop on FY24 headcount addition based on the current outlook.”

This outlook could change six months down the line if companies change their growth forecasts, he added.

IT companies had reported record hiring and attrition numbers during FY22 and in the first half of fiscal 2023. However, as inflationary pressures and the war-led energy crisis in Europe deepened, talent demand spiralled downwards.

With the added caution around North American and European banking sector, following the collapse of Silicon Valley Bank and the buyout of Credit Suisse by UBS, more caution in technology spending is expected.

Last week, global IT giant Accenture had announced 19,000 job cuts to manage cost even as it lowered revenue guidance for FY24.

The Indian IT sector may see another quarter of negative net headcount growth among the IT service bellwethers (top eight firms) for the fourth quarter of the current fiscal ending on March 31, according to staffing firm Xpheno.

“While attrition-triggered replacement hiring will be in play, expansion hiring will remain dull, if not absent,” said Kamal Karanth, cofounder of Xpheno. “The top eight firms clocked a net headcount growth of 240,000 people over the last four quarters. So, going by the trend, we could be looking at a relative drop of 50% in FY24 headcount,” he told ET.

The previous quarter was set to close with a net negative, if not for Cognizant adding 5,900 to the table, Karanth said. Similarly, the next two quarters do not look to be set for significant net additions to the headcounts, he added.

Sunil of TeamLease said the first half of any fiscal year is when companies hire almost 70% of their requirements. Under current market conditions less people are likely to risk leaving their jobs, he said.

While he could not confirm if there could be layoffs in the Indian IT companies going forward, he expects some restructuring. “Some amount of flab is always removed under these market conditions,” Sunil said.

However, analysts note that majority of reorganisations are likely to impact non-billable roles, and niche skillsets will continue to see demand in India.

OFFSHORING MAY PICK UP

A R Ramesh, director - managed services and professional staffing at Adecco India, said that given that the sector attrition is still above 20% and there are aggressive growth targets, the backfills or replacement hiring will continue to be healthy.

“The benefits of offshoring to India should help create a strong pipeline of talent demand even if the West remains under pressure,” he said.

Insights from ISG Research show that despite some restructuring introduced by technology companies, active hiring will continue by the Indian and global IT service providers, and Accenture will be no exception.

“The recently announced reduction at Accenture is more about normalisation to balance the overhiring done during 2021-22,” said Mrinal Rai, principal analyst at ISG.

Staff reduction is more towards non-billable corporate tasks that have always been the subject of reduction across service providers, Rai said.

Compared to an average 13,000 global net headcount addition over the past three quarters, Accenture reported a headcount growth of a meagre 424 people during its December-February quarter.

In the third quarter of the ongoing fiscal, the top five Indian IT majors reported a dip in quarterly headcount addition by almost 5,000.