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India’s top four outsourcers report rosy revenues, mild macroeconomic misgivings

Attrition woes subside as workers stop shifting, producing pleasing cost savings

India’s top four IT outsourcers, Wipro, HCL Technologies Infosys, and Tata Consultancy Services (TCS) all reported reasonably rosy results for their final quarter of 2022. the quarter rounding out 2022, despite global economic uncertainty.

Constant currency revenue growth for all four companies was strong: Wipro reported a 10.4 percent year-on-year jump, HCL managed 13.1 percent, TCS trumped that with 13.5 percent growth and Infosys reported 13.7 percent.

For TCS, North American and UK operations accounted for two-thirds of revenues. HCL experienced booking skewed toward North America, with strong growth in Europe this quarter past. Bookings for Wipro in Europe also rose , with 40 percent growth year-on-year. For TCS, North America as well UK grew 15.4 percent, while Continental Europe grew by 9.7 percent.

The attrition problems experienced by the outsourcers just six months ago appear to be have faded.

“We have significantly invested in building up capacity in 2021, tried as much as possible to bypass the industry’s hire from each other attrition cycle and focus on hiring at entry-level and invested in training and cross-training our resources,” said TCS CEO Rajesh Gopinathan on the company's earnings call. “That investment has hit our productive capacity and stood us in good stead.” According to Gopinathan, 2023 should being a “more normal kind of hiring trend.”

As for attrition, Infosys CEO Salil Parekh said “absolutely, we are seeing this coming down.” He added that reduced hiring to replace departed staff should have a positive impact on margins.

CFO Prateek Aggarwal said attrition at HCL was “moderating” and allowing them to reduce its "bench" - consultants not engaged on a client project.

“So as our attrition is moderating, quarterly annualized attrition is significantly come down over the last two quarters actually. Last 12 months doesn’t show that, to be honest,” said Aggarwal. “Quarterly annualized attrition that has come down quite a bit, and that gives us the levers to reduce the unbilled people on the projects and so on and so forth.”

The attrition rates for the past twelve months at HCL was 21.7 percent. TCS recorded 21.3 percent, Infosys 24.3 percent, and Wipro 21.2 percent.

TCS and HCL execs offered interesting perspectives on how cloud is driving their businesses.

Speaking of his cloudy customers, TCS’ Gopinathan said "Some of them have who gone very rapidly to the cloud, mostly lift and shift, are realizing that unless it is architected right, cloud costs are actually quite difficult to manage. And it’s a fairly large bill that can come, if you do not architect and if you do not actively manage the cloud environment."

HCL CEO Vijay Kumar said: “Lift and shift is not very high. Now people are — unless they have a very aging infrastructure, so they kind of look at it as an easy solution to do a lift and shift and they can do a modernization and optimization later. But most large clients are looking at application modernization and rearchitecting the landscape to perform financially in an optimal manner on the cloud environment. So I see that trend continuing and I see it only accelerate.”

The four firms all reported pipelines filled with contracted work and prospects for new projects, and therefore predicted strong growth for 2023. That news will be welcome worldwide, given all four have global footprints. ®

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