IT bellwethers slash headcount in FY24 but Indian techies find a home with GCCs

• India’s top IT sector companies have reduced their headcount by 75,000 in the last one year.
• New GCCs setting-up operations in India might have hired a similar number of tech talent, say experts.
• Even with renewed hiring, IT sector hiring as a whole suffered even as software product company hiring went down in the last 12 months.
• In 2024, hiring intent in the IT sector increased only 3%, even as overall hiring intent is at 19%, says Taggd.
  

Headcount in the top IT services firms in India is down by 75,000 in the last one year. However, experts say that there is no large-scale furore over joblessness in the system due to the extensive hiring undertaken by global capability centers (GCCs). Many new GCCs are setting-up shop in India, which is giving a much-needed push to sluggish tech talent intake by IT services companies.

Six out of eight IT bellwethers like TCS, Infosys, Wipro, LTI Mindtree, Cognizant and Tech Mahindra saw their headcount go down in the last 12 months, as per Xpheno, a staffing services company. HCL and LTTS however moderately added 2,400 and 1,600 people to their rolls. (See Table below).

Top 8 IT cos headcount & net additions as of Q3 FY24

Source: Xpheno

With this degrowth, collective headcount of the cohort has dropped to nearly the levels seen in early 2022. “The calendar year of 2024 too has begun with a rollback of headcounts to a pre-two year level, in what is clearly a cycle of sustained adversities the IT services cohort is dealing with,” said Kamal Karanth, co-founder of Xpheno.

GCCs: The bright spot

It’s not just IT services companies are cutting down hiring, job demand in software companies saw massive drop along with startups. But there is one bright spot in the tech market which is GCCs.

“GCCs had recruited similar numbers (around 60,000) in the last one year, and that’s why we do not see a bloodbath on the streets. Around 100-110 GCCs set-up shop in India in the last two years, and 60 of them came in the last one year itself,” Karanth tells Business Insider India.

GCCs are international companies which set-up shop in India, which takes care of activities like business support functions, back-office tasks, IT infrastructure and more. Since they kick-off operations, most of them hire anywhere between 500-2,000 people.

GCCs have now become one of the six top sectors which hire tech talent that includes IT services companies, software product companies, startups, consulting firms and non-tech sectors which hire tech talent. GCCs, IT services and software product companies are the three sectors which hire techies in large numbers

“Among the three, only GCCs will continue to hire in 2024, while IT services and software product companies will see at least two muted quarters ahead,” says Karanth.

Going by their enthusiastic uptake of office spaces, they seem to be intent on hiring in large numbers. As per a Colliers report, office space uptake of around 30 mn square feet with large deals (of over 100,000 sq ft) have shown an impressive 24% annual growth in 2023.

Almost 40% of the large deals in the top six cities have come from GCCs, particularly from technology and BFSI sectors.

“More than half of the large GCC deals achieved closure in the last quarter of 2023, indicating renewed momentum in GCC activity in the country. Large pool of talent, cost-effective rentals, adequate Grade A developments and favorable office market ecosystem will continue to uphold India’s vantage positioning from a capability centre perspective,” said Vimal Nadar, senior director and head of research, Colliers India.

Tech hiring to remain sluggish

With only one of its sub-sectors keen on hiring, the IT sector’s recruitment outlook as a whole has come down. As per a report by Taggd, the IT sector’s hiring intent for 2024 increased by 3%. The overall hiring intent across all the sectors however increased 19% for the current calendar year.

Job demand in the last 2 years
Source: Xpheno

The slowdown in IT hiring is pronounced in the earnings reports of recruitment firms as well. Info Edge which houses many internet-related businesses like Naukri, 99acres.com etc saw its revenues from the recruitment grow only by 3.1% year-on-year in Q3 FY24 due to sluggishness in IT sector hiring.

“While the non-IT hiring sector remained robust, the continued slowdown in IT hiring impacted Naukri's growth,” Hitesh Oberoi, managing director and CEO of Info Edge said in the press release.

Most large IT sector companies are only expected to do replacement hiring for the next few quarters, with a dull outlook for most. The sector’s sluggish hiring will impact engineering graduates the most as fresher hiring will be impacted.

“As many as 9 lakh engineering graduates pass out every year. They will see a major impact and see the biggest hit,” Karanth adds.