A rapid decline in hiring of fresh talent by IT and BPO companies, triggered by the global slowdown, is taking its toll on IT- focused staffing firms. A number of small and medium players in the segment are in the process of shutting operations while larger firms are planning to trim their presence and manpower.
According to industry insiders, nearly 40% of small and niche players in the segment will call it quits during the current fiscal, thanks to a lean business pipeline. Smaller staffing companies focusing on the IT space, which typically have 10-15 employees, comprise 30-40% of the largely unorganised recruitment industry.
The software services industry, which has pared its growth target to rates in the “high teens” in the latter half of 2009, has deferred mass hiring and stopped benching, in line with a new project-based staffing approach. In Bangalore, many large-scale contract employers have cut contract hiring by over 50%, sources said.
Pranab Sen, senior consultant at research and consultancy firm Zinnov, said, “If the situation continues as it is today, we expect that by March 2009, 30-40% of staffing companies employing less than 15 resource persons will have to shut down.”
With business getting leaner, too many recruiters are competing to fill in the same vacancies, he said. “To stay in business, some recruitment companies have begun offering price cuts. For low-end closures, rates have come down from 10% on annual salaries to 8.33%,” he said.
Some players in the segment, like 10-year old Udyog Consultancy Services, are offering themselves up for sale on the website `businessesforsale.com’. Udyog’s owner Srinidhi said that despite having a track record of completing high-end closures for clients like Motorola, Infosys, Siemens and Accenture, among others, the company has decided to sell-off as it had “no work for the past six months.”
He said, “I have all the clients, but there is no business to sustain my operations. Whereas we closed 30-40 positions earlier, business has dwindled to one or two closures since a few months. I do not know when things will change. If a big company buys Udyog for the right price, I will sell off and make money.”
Businessesforsale.com also advertises another ISO certified consultancy firm, which cites “lack of funds to expand”, as the reason for sale.
Larger companies, such as PV Shastri Associates, have right-sized their teams in a bid to wade through troubled waters. PV Shastri told FE, “I do not believe that the situation is catastrophic yet. If we can see through this year (fiscal 2009), after which the industry should revive, business will be huge again.” He said that he had trimmed the firm’s head count to 10 employees in a single location, from an earlier network of three locations employing 30 people.
US-based recruiter Clien and Bosch also shut its Bangalore and Chennai offices recently and currently operates out of Hyderabad.
In the hitherto talent-starved HR industry, large scale lay-offs have left many professionals scurrying for jobs. Saravanan (Saran) from recruitment firm Handigital Solutions Pvt Ltd said that HR candidates at a recent interview cited close to eight former employers who had closed down. “Companies that are partnership or proprietary firms and not process oriented are closing down. Business development will be hard for small players, given the current conditions. Those that have cash reserves for one year can sustain their operations,” Saran said.