What does decline in employee headcount at IT majors TCS and Infosys indicate?

Is the IT industry heading towards a challenging environment?


There was a major decline in employee headcount at IT majors Tata Consultancy Services (TCS) and Infosys, who together reported exits of over 11,000 employees. The companies revealed about the reduction in the number of employees during the third quarter results on Thursday. While TCS saw 5,680 employees departing during the quarter, as many as 6,101 people quit Infosys during this period.

What does this trend indicate for the Indian IT sector? Will there be further reduction in manpower or is this a temporary phenomenon? Is the IT industry heading towards a challenging environment in the near future? THE WEEK got mixed responses from industry and market experts.

“Certainly, there is a noticeable decline in the workforce numbers for major IT companies. However, within the spectrum of this downward trend, there exists significant heterogeneity. Certain skills are experiencing increased demand, leading to positive recruitment trends. Meanwhile, in other domains, there is a consistent decline quarter by quarter,” pointed out Alok Shende of Mumbai-based Ascentius Consulting.

The recent dip in headcount figures for the two IT majors reflects the challenges posed by AI and automation in the IT and ITES industry. Besides, the sluggish Western economy, compounded by global headwinds and geopolitical crises in the major parts of the world, have added additional layers of uncertainty to the strategic planning of the industry.

“While we are anticipating an approximate 15-20 per cent reduction of fresher hiring, measures taken by Infosys, such as the recent interim increment for employees, may instill confidence in the market and suggest a positive outlook, moving forward. 2024 is likely to remain stable this way where the addition of headcount is unlikely to be in tune with the revenue growth of the large firms. Large organisations are likely to continue driving optimisation and innovation,” pointed out Aditya Narayan Mishra, MD and CEO of CIEL HR.

Owing to the impact of the ongoing macro-economic challenges, the Q3 performance of leading IT companies indicated a subdued growth. The headcount of the major IT players continued to decline in the third quarter, posing concerns, particularly for freshers, as several IT firms are either abstaining from campus hiring or adopting a restrained hiring approach.

Despite these industry hurdles, there is slight optimism within the sector. Students equipped with the right skill set and talent, particularly in domains like data science, AI and ML, cybersecurity, and cloud computing can make a significant impact.

The recent results also suggest a challenging period ahead for talent in the IT sector. However, on a positive note, a considerable portion of the workforce exits appear to have been absorbed by other IT services companies and emerging global capability centers (GCCs) entering India. “Companies are also shifting focus towards upskilling their existing workforce and moderating their recruitment rates for new talent. Whether for freshers or mid-to-senior level professionals, upskilling is imperative to stay relevant and competitive. Despite the current scenario, the industry anticipates that as macroeconomic conditions stabilize, companies will optimise their workforce strategies. This, in turn, is expected to generate demand for IT professionals not only in the technology domain but also in the non-tech sector,” observed Sachin Alug, CEO, NLB Services.

Undoubtedly, the net headcount decline at Infosys and TCS signals a profound shift in the tech industry's landscape, and few experts point out that rather than a cause for concern, this strategic pivot reflects a forward-thinking approach to staying competitive in an era of rapid technological advancements.

“In today's digital age, it is no longer about sheer headcount numbers but about the quality and skills of the workforce. Infosys and TCS are proactively aligning their teams with the evolving market needs. They are investing in reskilling and upskilling initiatives, recognizing that innovation and technology proficiency are at the core of delivering value to clients. This transition marks a transformative phase in the technology industry, where staying ahead requires a commitment to fostering talent with cutting-edge skills. It is an exciting evolution that underscores the industry's resilience and determination to remain at the forefront of innovation. The net headcount decline is not a retreat; it is a strategic advance toward a future where technology and innovation reign supreme,” observed Krishna Kumar, founder and CEO, Learnbay. 


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