IT hiring preview: September quarter likely to see further decline in tech employee base, say experts

In the past three quarters, overall hiring in these five companies remained in the negative while for the two quarters preceding that, the numbers steadily declined.

It must be noted that the negative hiring numbers do not imply that the firms laid off but reflect the net dip in hiring in a particular quarter.

A recent ICRA research report noted that there has been a significant reduction in hiring given the slowdown in the growth momentum coupled with utilisation of the considerably excess capacity added in 2021-22 and the first half of 2022-23. “Moreover, with easing demand-supply mismatches, attrition levels saw considerable tapering in the past two quarters to 17.4% in Q1 FY24, in sync with ICRA’s earlier expectations,” it noted.

But what's the reason for the sluggish hiring trends?

TeamLease’s Sunil C explained that there is continued uncertainty about hiring in the aforementioned firms because they are unable to forecast the next two to three years which will impact their entire talent pyramids.

“Most of the long-term transformation projects have been broken down to critical small projects which can immediately impact either productivity, grow revenue or improve customer experience which in effect means hiring will continue to be subdued or selective. Most of the organisations are continuing to focus on short-term return on investment (ROI) through measures such as cost rationalising, improving utilisation and automation,” he said.

Meanwhile, an Elara Capital report suggests a weak FY24 is in the offing for the IT sector. It pointed out that FY23 growth was at 8% in constant currency (CC) terms, lying within its guided range. FY24 revenue guidance, on the other hand, was muted at 2-5%, the slowest since the COVID-19 quarter Q4 of FY20.

“This is indicative of a very soft demand environment as Accenture also mentioned that 2% of this growth will be from the inorganic stream,” the research report noted.

According to Elara Capital, generative AI is expected to fuel customer interaction, employee engagement, automation and productivity. It may open up more digitisation opportunities in strategy, model customisation, responsible AI and customer experience.

It also noted that Accenture plans to double its AI workforce to 80,000 from 40,000.

However, TeamLease’s Sunil C believes that in India, there are still experiments going on to evaluate the impact of GenAI on the workforce though the preliminary understanding is that AI will help in improving the productivity of the existing workforce but may be at a later stage replace or displace many jobs with new set of skilled workforces.

“The customers also expect IT services organisations to share the cost benefits due to new age tool implementation leaving very little scope for margin expansion. The changing landscape of the workforce, faster adoption of technology and uncertain market conditions are hampering the future projections for IT organisations,” he added.

In an interaction with CNBC-TV18, Nicolas Dumoulin, Senior Managing Director India and Thailand, of staffing firm Michael Page India, said that Gen-AI would eventually replace basic coding roles in IT services firms. However, with the increased use of AI, there will surely be cybersecurity concerns and thus, there is a need for talent that can find and fix flaws in automated codes. This kind of talent is scarce in India at present, he claimed.