The previous financial year, 2023-24, marked a bleak phase in domestic IT services hiring, with headcount and job offers declining amid muted global demand for software services and advances in artificial intelligence.
But the tide appears to be turning in terms of both business and recruitments for India’s $245-billion IT services industry, according to industry analysts and recruitment firms. IT services companies, however, have not provided a clear indication of their hiring plans for this financial year, 2024-25.
“Some of our IT clients have inked a few large deals, which in turn has led to a demand for more employees skilled in Generative AI,” said Vijay Sivaram, chief executive of Quess IT Staffing, adding that he expects hiring in the IT sector to have increased by 25% in the three months ended March.
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Tata Consultancy Services Ltd, India’s largest software exporter, in May said it had doubled its pipeline of generative artificial intelligence projects to $900 million in the March quarter. Infosys Ltd, India’s second-largest IT services company, has said it is working on 225 GenAI projects.
“There has been a 20% uptick in mandates in the IT sector in the June-end quarter when compared sequentially,” said Sunil Chemankotil, country manager at recruitment firm Adecco India.
“The bench utilisation is high and, therefore, IT firms are now hiring candidates with experience in larger numbers than in earlier quarters,” Sivaram added.
Utilisation rate refers to the proportion of staff actively involved in projects while ‘bench’ refers to employees yet to be assigned a project. Infosys and Wipro Ltd reported a utilisation rate of 83.5% and 86.9%, respectively, as for March.
Improving prospects
Industry experts estimate the worst may be over for India’s IT sector although elections in key markets such as the US and the UK could see changes in outsourcing policies, and the Israel-Paliestine and Ukraine-Russia wars could still impact the deal pipeline.
“IT sector (coverage universe) continues to transition from a protracted IT upgrade cycle and low discretionary spending to some normalisation in (the second half of FY25), which is our ‘base’ case,” HDFC Securities analysts Apurva Prasad, Amit Chandra, and Vinesh Vala wrote in a note dated 3 July.
“We believe that the growth/earnings cut cycle has bottomed out, but the pace of recovery remains uncertain, especially with lingering macro events over the next couple of quarters,” the analysts added.
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TCS, Infosys, HCL Technologies, and Wipro reported revenues of $7.36 billion, $4.56 billion, $3.43 billion, and $2.66 billion, respectively, for the three months ended March. Save for Infosys, whose revenue declined 2.1% sequentially, the others reported revenue growth, although not by much.
TCS, HCLTech, and Wipro saw their revenues grow by 1.1%, 0.4%, and 0.05%, respectively. Results for the April-June quarter are awaited.
Calibrated hiring
“Our estimates indicate that hiring has grown by 5-7% in Q1 (April-June quarter) compared to the previous quarter. This increase is mainly driven by higher IT spending and investments in AI capabilities,” said Krishna Vij, vice-president and business head of IT staffing at TeamLease Digital, a Bengaluru-based staffing firm.
Despite volatile economic conditions and budgetary constraints, “we estimate further acceleration in hiring,” Vij added.
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“We have commenced fresher hiring from campuses and continue to recalibrate our lateral hiring, focusing more on utilising the capacity that we have built over the prior years,” Milind Lakkad, TCS’s chief human resources officer, had said during the company’s post-earnings conference call on 12 April.
His cross-country peer had given a tempered view on hiring, stating that demand would dictate recruitment. “We will look at hiring as the year goes through. We do not have a number to give at this point in time,” Jayesh Sanghrajka, chief financial officer of Infosys, had said during the company’s post-earnings briefing on 18 April.
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