India's major IT outsourcers slow hiring and fret about deal pipelines

Two years ago the big four hired 243,000 workers. Last year that fell to 82,000

Having spent 2022 struggling to retain workers in the face of high staff attrition rates, India's top four IT outsourcers have since slowed hiring and are worried their workers may not have enough to do.

"FY 23 was a year of transition, as supply-side challenges abated while pandemic-depressed travel and discretionary spends normalized. We navigated this change well, without slowing down our investments in our people, research and innovation and intellectual property," said Tata Consultancy Services (TCS) CFO Samir Seksaria in the firm's Q4 2023 earnings statement.

The outsourcer added over 22,000 net employees during the year which ended on March 31. Only 821 of those were added in the final quarter – well down on usual hiring rates.

Execs from TCS stated that they are restructuring the firm's operating model to change its cost structure – which included an increased reliance on temporary workers. CEO Rajesh Gopinathan attributed the use of such staff to "various travel restrictions and supply side challenges in the local market."

"We are structurally and systematically moving to go back to our more preferred operating model, which is about five percent to eight percent of our onsite workforce being contingent labor," said the CEO, who added that in North America there was "quite a distance to go" before it would have hired all the contractors it desired.

Chief HR officer Milind Lakkad added that the firm was "honoring all job offers" – an action competitor Wipro has allegedly failed to do.

In February, entry level hires at Wipro were given only four days to decide if they wanted to take a 46 percent salary cut in exchange for immediate work placement. The company has also been accused of forcing would-be employees to retake months-long unpaid training before having offered positions honored.

CEO Thierry Delaporte said in Wipro's Q4 2023 earnings call that utilizations rates had improved to around 80 percent in the previous quarter.

The corp hired over 22,000 freshers, which it is now calling "next-gen associates", in FY 23 – the highest in its history. Delaporte also said Wipro had closed its strongest ever bookings recorded in a year and its IT services operating profit stood at the highest ever in a year as well – $1.7 billion.

Infosys also recorded 80 percent utilization rates, but CFO Nilanjan Roy was not happy, labelling that number "probably one of the lowest I've seen."

The services giant also shrank its workforce by 3,611 across the quarter. Headcount at the end of Q4 2023 stood at 343,234. Net hiring for the year was down even after hiring 51,000 freshers.

HCL bucked the trend, with CEO C. Vijayakumar remarking that his hiring of 26,374 freshers in FY 2023 represented the highest in HCL history.

"Our people ramp up continues," declared [PDF] Vijakaumar, adding that although fresher addition had slowed in Q4, the firm was still scaling the cohort's intake.

"We will have a sustained focus on this over the next two to three years to improve this further," said the CEO.

However, despite any ramp up of freshers, the total headcount of 225,944 stood 11,100 less than it had one year prior. The services titan also sees a reduced deal pipeline, which could justify the reduction.

"There is a slowdown, but still, we believe there is a floor level which will be higher than the pre-pandemic cycle. And the time to recover also should be shorter," said Vijakaumar.

Wipro's Delaporte also commented on "headwinds" and "macro uncertainties" but said the outlook remained optimistic.

"Banking and insurance, technology are sectors where we have seen slow down or cut in discretionary spend over the last weeks," said Delaporte. The CEO said he thinks the consulting business is undergoing an "evolution." While the sectors he name checked are declining, areas like security in SAP are flourishing.

HCL and Wipro had the lowest last-twelve-month attrition of the four IT outsourcers at 19.5 and 19.2 percent respectively. Infosys had the highest attrition at 20.9 percent and TCS 20.1 percent.

The rates mark an improvement for all companies except Infosys, which reported in Q4 2022 a 17.4 percent attrition rate.

The industry at the time was trying many schemes to keep employees in check – from banning moonlighting to clawing back bonuses and issuing non-compete clauses.

The big four IT outsourcers now seem much less eager to hoard employees.

Of the lot, Infosys had the highest revenue growth at 11.7 percent year on year, taking the US dollar amount to $18.2 billion. Wipro followed with 11.5 percent growth to $11.2 billion, then HCL at 9.6 percent to $12.5 billion and TCS 8.6 percent growth to $27.9 billion.

And because this is the world in 2023, half of the four IT outsourcers said in their earnings calls they have started using generative AI. TCS is running an internal pilot, Infosys has already embedded it in active products.

"We are leveraging generative AI capabilities for our clients and within the company. We have active projects with clients working with generative AI platforms to address specific areas within their business," said Infosys CEO Salil Parekh. "We have trained open source generative AI platforms on our internal software development libraries. We anticipate generative AI to provide more opportunities for work with our clients, and to enable us to improve our productivity." ®