Hiring outlook for Indian IT industry weakens on global macro woes, slow discretionary spends

Weak global cues and a cut in discretionary spending by clients are expected to sharply reduce campus intake by the Indian IT industry this year with market watchers saying that Infosys and HCL Tech's subdued take on hiring signals a tough road ahead for freshers in the near term.

In the opening week of Q2 earnings season, IT biggies TCS, Infosys, and HCL Technologies reported a sequential drop in employee tally--a staggering 15,800 on a cumulative basis. The Q2 scorecard of tech heavyweights fell short of expectations as global growth skid on elevated levels of inflation and interest rates, reduced investment, and geopolitical shocks, exacerbating worries.

Tech companies say that clients continue to defer newer, non-critical initiatives, choosing to focus on optimisation.

While global voices concede there are no signs of bottoming out just yet, JP Morgan's Jamie Dimon has warned that the world is facing the 'most dangerous time in decades'.

Meanwhile, Infosys's headcount fell by 7,530 to 3,28,764 as of September 30, 2023, against 3,36,294 in the June quarter.

Infosys, which hired over 50,000 freshers last year, has made it clear that it is not going to campus for recruitment for the time being. The Bengaluru-headquartered company slashed annual sales forecast to 1-2.5% (from the previously stated 1-3.5%) in a sign of continued curtailment in IT projects amid global macro economic uncertainties.

TCS reported a decline (of 6000 quarter-on-quarter) with its overall staff count at 6,08,985 at the end of September 2023, but has maintained a fresher hiring target of 40,000 for the current fiscal FY24.

TCS chief human resources officer Milind Lakkad said the company has not stopped hiring, but the overall new hires are trailing the number of people quitting the company due to which the overall count is down.

HCLTech's total employee base dropped by 2299 to 2,21,139 at the end of the September 2023 quarter compared to June quarter as the company reduced hiring amid an easing of attrition level.

"Due to significant fresher bench and reduced demand, major Indian IT firms are scaling down campus recruitment. The decision is prompted by a weak deal pipeline and recessionary concerns in the US market," Krishna Vij, Business Head IT Staffing at TeamLease Digital said.

Large IT Services companies, having hired many freshers last year, are now focused on upskilling them in Gen AI, SAP, and other emerging technologies rather than new campus recruitment, Vij added.

Sachin Alug, CEO of NLB Services believes a further decline of at least 10-15% in the campus offers could be expected this year.

"As of the first week of October, there has been a decrease of more than 20% in the number of students placed compared to the same period last year, despite a consistent number of companies participating in the hiring process," Alug said.

During the Q2 briefing, Infosys CFO Nilanjan Roy explained that the company has a significant fresher bench and headroom for increasing utilisation, and hence "is not going to campuses as yet".

"Last year, we hired 50,000 freshers and hired ahead of demand...we still have a significant fresher bench... we are, of course, training them on Gen AI...but we still have a way to go on utilisation, and at the moment are not going to campuses as yet...we will monitor this every quarter looking at our future projections," Roy added.

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That said, the company will honour all the offers made, onboarding them as projects come up.

To a pointed question on whether or not the company will go to campuses this year for hiring, Roy said, "As we see it, I don't think it is likely that this year, we are going to be going...but we will watch it every quarter".

HCLTech has reduced the revenue growth guidance for the full year in the range of 5-6% from 6-8% projected at the end of the June 2023 quarter due to below-expectation performance of the company during the first half of the current fiscal.

The company says based on the deals won, Q3 and Q4 look to be very strong. The Noida-headquartered IT services company plans to hire 10,000 freshers in the current fiscal year--nearly a third of the FY23 levels.

"So fresher hiring is going to be about 10,000 people. I think previous year we had about 28,000...primarily that year we grew 15-plus%, now we are talking about 5-6%. So it's really proportional to the growth, and that is what you see in the numbers," HCLTech CEO and Managing Director C Vijayakumar told PTI.

A recent report by JP Morgan has said there are no signs of bottoming out yet. "We remain negative on the sector as we haven't seen a meaningful uptick in demand in our recent checks...We think the overall set up is not as positive as last quarter," the note said adding that as investors have assumed FY24 to be a "washout" and shifted focus to FY25 hoping for a rebound.

The IT industry's calibrated hiring adjusted to the realities of the market is a "passing shower, not climate change", says Siva Prasad Nanduri CEO of Diensten Tech Ltd.

With organisations moving towards generative AI and training employees on AI platforms, more jobs are expected to be created in the near future, and the IT industry is seen growing from a current 4.5 to 5 million-person workforce to 7 to 8 million in the next few years, Nanduri said.

"While we have seen peak hiring post-pandemic, we have also seen tremendous headwinds in the IT industry in the last few quarters, including startups facing long winters with funding. We can expect IT companies to slow down on hiring by 50% compared to last year, and this will also impact fresh hires significantly across the industry. However, this impact will be a passing shower, not climate change," Nanduri added.

The escalating Israel-Hamas war has compounded the prevailing global challenges adding a "new level of uncertainty", Sridhar Vembu CEO and Co-founder of Zoho said recently as he urged companies to focus on business fundamentals and financial prudence "now more than ever".