IT hiring shows signs of life but firms stay cautious

Active hiring from top IT services companies recorded their first rise in the past 20 months, with the total number of open positions accepting applications rising to 82,000 in March from a low of 50,000 in January this year, data from LinkedIn and other top job boards showed.

But on the back of dipping attrition, the collective gross hiring by the top IT services companies fell 4-6% QoQ in the quarter ending March, shows an analysis done for ET by staffing firm Xpheno, based on talent movement patterns in the January-Mar period. The analysis looked at Wipro, Infosys, TCS, HCL, LTI Mindtree, L&T Technology Services, Tech Mahindra and Cognizant.

“While gross hiring (attrition refills and fresh hiring) has been low and declining for eight quarters, the current rise in active demand denotes a return of hiring for capacity in the ITS cohort,” said Anil Ethanur, co-founder, Xpheno.

“With the 4-6% drop, the gross hiring volume for the quarter ending March 2024 could emerge the lowest in more than two fiscal years. But despite the dip in gross hiring, the combined impact of lowered exits, will result in a headcount degrowth that’s lesser compared to previous quarter,” he added.

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Utilization

IT sector consultants said that the conversation for FY25 is still heavily focused on more dilution of the bench, increasing automation, improving efficiency and targeted hiring mostly in niche areas such as AI and GenAI amid continued macroeconomic uncertainty and hardly any signals of demand recovery yet.

“From an FY25 talent acquisition perspective, IT services bellwethers will continue to exercise caution as they double down on improving margins. Even as there are green shoots of recovery in select pockets, overall demand signals are weak and not suggestive of a spending-rebound over the next two quarters,” said Nitin Bhatt, partner & technology sector leader, EY India.

“Clients are still hesitant to release fresh budgets due to the continued macroeconomic uncertainty,” he added.

“Any hiring pick-up will focus majorly on niche skills in areas such as cyber, digital and AI, as end customers partner with tech companies for reducing costs, improving efficiency and enhancing productivity. The headline theme, across the board, is how to leverage tech in order to do more with less,” said Bhatt.

Top roles in demand are mostly in the digital and Cloud skills domain such as Cloud Architects, SAP Technical Architects, Kubernetes SMEs, Azure & GCP Specialists, Hadoop Engineers, Full Stack Engineers etc.

Circumspect Outlook

Rishi Jhunjhunwala, Senior Vice President, IIFL Securities, said: “Overall there is no material pick-up in demand and FY25 could be more muted than anticipated by the Street, in terms of revenue growth. But hiring may pick up slightly after companies have focused on manpower optimisation, freeze on hiring over the whole of last year. Some positions will open up as companies have managed to increase utilisation and lower attrition.”

Data shows that the biggest IT services companies have left a trail of 75,000 net headcount reductions over the last three quarters.

“Current hiring action will hence be primarily focussed on regaining lost talent and reclaiming capacity in preparation for the fiscal ahead,” said Ethanur.

“We expect the IT services hiring market to continue to be down this fiscal as the US market has still not recovered,” said Karthik Sridharan, co-founder and CEO, Flexiple, a tech-driven hiring platform.

Total number of open positions up at 82,000 in March vs a low of 50,000 in January

  • 4-6% drop in collective gross hiring action by the biggest IT services companies in Q4 vs Q3
  • Gross hiring (attrition refills & fresh hiring) declined for eight consecutive quarters
  • Average attrition down at 14% vs 20% a year ago

FY25 Hiring Outlook in IT Services

  • Experts said hiring to stay muted.
  • Most of the talent demand to be in AI and related niche tech skills
  • Companies to continue focus on smaller bench, increasing automation, improving efficiency

William Murphy

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