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Waning demand for IT services hits hiring at Indian tech majors

India's Infosys signs $1.5 billion contract to leverage AI solutions

India’s leading I.T. service providers are slowing recruiting as clients scale back expenditure and delay projects due to macroeconomic issues, reversing the excesses of recent years in anticipation of growth.

After reporting disappointing results, Tata Consultancy Services (TCS.NS), Infosys (INFY.NS), and HCLTech (HCLT.NS) reduced staff numbers in the second quarter. HCL and Infosys cut their full-year sales forecasts.

“Firms overhired in 2021-2022 in anticipation of growth this year, which has not materialized, and most service providers are emphasizing using their current workforces,” said HFS Research CEO Phil Fersht.

Campus hiring, the mainstay employee resource of the Indian I.T. industry, which has built its niche on appointing throngs of engineers on various client projects, slowed in the April-June quarter and has accelerated since, raising concerns about the U.S. and U.K. economies.

Analysts don’t expect I.T. service demand rebounding soon, and leading I.T. businesses’ employment patterns are limited as customers curb discretionary spending following a pandemic boom.

TCS hired around 120,000 people, Infosys 83,000, and HCL 57,000 in the previous two fiscal years.

The first half of this year saw Infosys’ net employee headcount drop by 14,470 and HCLTech’s by 4,800. TCS cut 5,810 employees within the same time.
Many have delayed or reconsidered college recruiting and focused on staff usage or billable working hours.

We hired ahead of demand, but staff utilization plummeted as demand slowed this year. We have a large fresher bench and opportunities for utilization enhancement, “Infosys CFO Nilanjan Roy remarked during the results media presentation.

Roy said Infosys wants 84%-85% workforce utilization from 81.8%.

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