Focus on automation and re-skilling the existing workforce, coupled with low demand, has led to lower headcount growth for Indian information technology and business process outsourcing companies in the financial year 2017-2018. Both the IT bellwether companies—Tata Consultancy Services (TCS) and Infosys — have reported employee net additions that are the lowest in recent years.
According to annual reports of companies, TCS saw net additions declined to a five-year-low in FY18 to 8,000 versus 33,000 net additions in FY17 and 24,000 in FY14. Infosys Group made employee net additions of 3,743 in FY18, which was the lowest since 2015. In 2013-2014 Infosys had made net additions of 3,717 employees — a tad below FY18 numbers.
Net additions are the number of employees hired/adjusted for forced and routine attrition in IT companies.
At Infosys, the attrition rate has risen to 16.4% versus 15% in FY17, while at TCS, the overall attrition has remained flat at 11.8% against 11.5% last year. The IT services attrition was up at 11% versus 10.5% in FY17.
The numbers are in line with the less than encouraging commentary made by National Association of Software and Services Companies (Nasscom). The IT trade body had predicted that the sector would create about 20-38% fewer jobs in FY18. It translates into the creation of 1.3-1.5 lakh new jobs in FY18, which includes both fresher and lateral hiring, as compared to 1.7 lakh jobs in FY17.
To be sure, management commentary from IT companies in the last year has also indicated growing focus on digital and re-skilling the existing workforce on the changing digital technologies. Ajoyendra Mukherjee, executive vice-president and global head (human resources), had said at an earnings conference that the company had started training all the employees in digital two years ago and is able to re-deploy them which is reflecting in TCS digital revenues comprising around 20% of the overall revenues.
Highlighting business model changes as the key risks, TCS annual report has stated that rapidly evolving technologies are changing technology consumption patterns, creating new classes of buyers within the enterprise, giving rise to entirely new business models, and therefore, new kinds of competitors. To mitiigate these risks, the company plans to continue investments in Digital through large scale re-skilling and focus on research and innovation efforts for leveraging in-house expertise, among other measures.
With digital the way forward, Nasscom has said that the future of the industry lies in ‘Digital at Scale’ as global digital spending is growing at 20% annually. The digital revenues grew at 30% in FY18, demonstrating the base for a solid foundation in digital capabilities built by the sector.
However, at the same time, hiring in FY19 will be flattish, which is for the second year in a row that the IT trade body has predicted a flat growth rate. The trade body has projected a growth rate of 7-9% for the domestic IT and BPO industry with a hiring of one lakh people.
Not just digital, but also slower business momentum has put brakes on large scale fresh hiring. Infosys CFO MD Ranganath has earlier said, “In the last two or three quarters, the rate of revenue growth has been faster than the headcount addition. If you look at the whole first half of this year and compare to last year, we have added about 8,000 employees less. It is because of a combination of higher utilisation and some amount of productivity improvement.”
Traditionally, the utilisation level for the top-tier companies stood at 70% but now this is consistently hovering above 80%. In effect, the number of IT employees on the bench is also lowered.
The Indian IT industry during its heydays used to hire over 2.3 lakh fresh engineering graduates but now the number runs into thousands.