And the early indications for the ongoing financial year aren’t good either. Infosys expects revenue growth between 1% and 3% for the full year, and Wipro anticipates that revenue could drop by 1.5%, and may at best rise by 0.5%, in the June quarter.If those forecasts hold, it won’t be good news for engineering graduates.
Peter Bendor-Samuel, CEO of IT consulting firm Everest Group, believes that the headcount reductions are driven by the ongoing pullback of talent after excessive hiring during the Covid boom and the ongoing industry contraction in demand.
The US economy is doing well, but, as TCS CEO K Krithivasan recently said, US enterprises continue to be worried about a possible slowdown or recession, which is keeping them from making big IT spends.
Wipro’s chief of HR, Saurabh Govil, also attributes the headcount reduction to the demand environment, but he says operational efficiency too has improved, requiring fewer people. Infosys CFO Jayesh Sanghrajka too ascribes the lower headcount to the changing demand environment over the past year.
Phil Fersht, CEO of US-based IT advisory HfS Research, however, believes Gen AI is also playing a role in IT staffing demand. He says one major US enterprise has just concluded it can remove 15% of its IT staff from application testing by running an LLM (large language model) against its testing processes. “And this is just the start. When you consider that 20-30% of revenues for Indian-heritage IT services providers involve testing and quality assurance, it’s clear that there is growing pressure to weave Gen AI into bread-and-butter IT areas like testing, routine maintenance, and development. It doesn’t take a rocket scientist to conclude that a million of the 7 million Indian employees (including GCCs) supporting routine-based testing and coding work could be eliminated in the next couple of years,” he says.
Govil says currently the IT services portfolio is still manpower intensive, but “in the long term, as we move to AI, there can be divergence in terms of headcount.”
The good news is that global capability centres (GCCs) of MNCs are hiring. Newer GCCs are constantly establishing bases in India. Last year, they accounted for much of the hiring in the tech industry. That trend may continue into this year.