IT companies hit the pause button on the hiring plan

Five of the country’s 10 largest IT services firms reported a gradual decline in sales and support staff in the September quarter, as they laid off non-revenue-generating people and imposed informal moratoriums on hiring.

The country’s fourth and fifth largest IT services firms – Wipro Ltd and Tech Mahindra Ltd – reported a gradual decline in sales and number of support staff and software engineers, respectively, in July-September.

L&T Technology Services Ltd, the smallest of the three IT firms under engineering and construction conglomerate L&T, and Hyderabad-based Cyient Ltd also ended the latest quarter with reduced sales staff. The tenth largest IT firm, Zensar Ltd, also reported a gradual reduction in the workforce. This is the first sequential decline in headcount at any major IT firm since April-June of 2020.

IT services firms went on a hiring spree amid the pandemic as business shifted online. According to an analysis by Mint, between July 2020 and September 2022, the 10 largest IT firms added nearly a third of their workforce, or half a million people.

The 10 largest IT firms together had 1.74 million people at the end of 30 September.

But fears of an impending slowdown and declining profitability have changed the mood and outlook of some technology services firms.

Take a sample of this:

Wipro has “rebadged” 130 out of 250 of its facilities management group to CBRE, a real estate consultant under which these employees managing the Bengaluru-based firm’s large campuses will come on the payroll of a real estate consultant, two executives familiar with Huh. Said with development.

Additionally, any expense item in any of Wipro’s departments in excess of $10,000 will now have to be approved by the CEO’s office.

A Wipro official said, “Profitability is under pressure. When there is uncertainty over demand, we have to take these steps (monetization of appointments and sanctions for spending more than $10,000). We believe… All firms are becoming practical at controlling costs.”

A Wipro spokesperson said, “Cost optimizing and promoting operational efficiency has always been a part of our strategy. We started our annual increments and quarterly promotions in Q2 and are looking to invest in high growth areas. Continuing – Fullstride cloud offerings, cyber security and engineering, among others.”

A Genser spokesperson said in an emailed response, “The headcount movement is in line with the industry cycle. We mentioned earlier that we have taken some clear measures to improve margins, and consider non-essential travel as one of the levers. The firm is in the midst of implementing a very focused and disciplined margin improvement program that includes multiple levers, including improving the service mix, improving advertising, improving usage, optimizing the pyramid and optimizing support costs. And the cost of talent acquisition is included.”

Hiring pace in the three largest IT services firms – Tata Consultancy Services Ltd, Infosys Ltd and HCL Technologies Ltd – was also the slowest in two years in July-September.

The cost of employees in IT firms is 55-65% of the total expenditure; For this reason, some companies are slow to hire experienced professionals.

Wipro’s operating margin stood at 15.1% at the end of September quarter, down 410 basis points from 19.2% at the end of June 2020.

Tech Mahindra’s profitability stood at 11.4% at the end of the latest quarter, up from 10.1% at the end of June 2020. But its operating margin touched a high of 15.2% at the end of the June quarter, prompting the company to ramp up all non-essential operations. Travel on hold and hire less experienced professionals. A Tech Mahindra executive said, “As of now, position backfilling is not visible in most of the projects.

Around 53% of Tech Mahindra’s 163,912 employees were added as software professionals at the end of September quarter, while 42% are BPO professionals. The rest are sales and support staff.

Emails sent to a Tech Mahindra spokesperson did not elicit any response.