IT firms hit the pause button on hiring plans

Five of the country's 10 largest IT services firms reported a sequential decline in the sales and support staff in the quarter to September, as they let go of non-revenue generating people and put an informal freeze on hiring.

L&T Technology Services Ltd, the smallest of the three IT firms under engineering and construction conglomerate L&T, and Hyderabad-based Cyient Ltd also ended with fewer sales staff in the latest quarter.

Zensar Ltd, the tenth largest IT firm, also posted a sequential reduction in workforce.

This is the first sequential decline in headcount at any large IT firm since April-June of 2020.

IT services firms went on a hiring spree amid the pandemic as business shifted online.

Between July 2020 and September 2022, the 10 largest IT firms added nearly a third of their workforce or half a million people, according to an analysis by Mint.

The 10 largest IT firms, together, had 1.74 million people at the end of 30 September.

The pace of hiring at the three largest IT services firms—Tata Consultancy Services Ltd, Infosys Ltd and HCL Technologies Ltd—was also the slowest in July-September in two years.

Staff costs account for 55-65% of total expenses at IT firms; for this reason, some firms are looking to go slow on hiring experienced professionals.

Wipro's operating margin was 15.1% at the end of the September quarter, having shrunk 410 basis points from 19.2% at the end of June 2020.

Tech Mahindra's profitability was 11.4% at the end of the latest quarter, against 10.1% in end-June 2020. But its operating margin touched a high of 15.2% at the end of the June quarter, prompting the company to put all non-essential travel on hold and hire fewer experienced professionals.

About 53% of Tech Mahindra's 163,912 staff at the end of the September quarter are clubbed as software professionals, while 42% are BPO professionals. The remaining are sales and support staff.