Indian IT industry: Times, they are a changin’...and fast

Just six months ago the Indian IT industry was avidly debating issues such as moonlighting, freshers’ salaries, attrition and WFH (work from home). Today it has shed these worries for new ones as they negotiate global headwinds and what was an employees’ market has quickly metamorphosed into an employers’ market, that has been further empowered by the arrival of of generative AI-powered ChatGPT tools.

“These are all cyclical things. When the demand environment was good, companies hired more people, and salaries went up. Companies started looking at moonlighting with policies. Today, the job recession is back. So, employees will not look at moonlighting as they may lose their jobs,” V Balakrishnan, Chairman, Exfinity Ventures & former CFO of Infosys told the DH.

HR professionals working closely with the IT firms are getting a sense that the hot topics from the pandemic days such as shopping for offers, the number of pay hikes staffers could bargain for at the time of job switch, are no longer relevant.

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The topline hit

IT spending worldwide is projected to grow 5.5 per cent to reach $4.6 trillion in 2023, according to global consultancy firm Gartner. Despite strong growth projections in the IT services segment, Indian IT industry players are not likely to touch double-digit revenue growth rates in FY24. Rating agency CRISIL has projected the Indian IT services industry to grow around 10-12 per cent in FY24, a fall of 7-9 per cent from the previous fiscal. Moreover, the growth projections no longer look similar across the industry as divergence starts to play out. For instance, IT majors like Infosys and HCL Tech have projected to grow their top lines in single digits. The case seems no different for TCS and Wipro either. Meanwhile, some of the mid-tier companies are expecting double-digit growth in revenues in the ongoing fiscal, albeit on a small base.

Attrition and fresh hires

The topline hit has told on employee addition. The top four- TCS, Infosys, HCL Tech, and Wipro- added 66 per cent fewer employees in FY23 as compared to the previous fiscal. In FY23, their combined intake of new hires was 82,679 as compared to 2.43 lakh in FY22. With demand becoming tepid, coupled with mass layoffs by global technology giants and startups, employee attrition has started to fall sharply. Infosys, for instance, witnessed the sharpest drop in its attrition of 340 basis points to 20.9 per cent in the fourth quarter, while TCS’ attrition fell to 20.1 per cent. The swift change in sentiment has taken its biggest toll on fresher hiring as many companies face idle bench strength (reserved employees).

“In most sectors, the tide has turned with employees now concerned with possible layoffs and not looking to jump. There are still some shortages in key skills such as product management and data science but these are the exceptions. With regard to fresher salaries, these have been already adjusted down to fit the new environment,” Peter Bendor- Samuel, CEO of global consultancy firm, Everest Group told the DH.

During the pandemic, increasing the freshers’ salaries became a topic of discussion with many companies creating different slabs of compensation for higher skill sets. But most firms have abandoned those initiatives as they face project ramp-downs with falling projects in the digital technology space.

Exiting WFH

Apart from fresher salaries, WFH (work from home) has now mostly been replaced with the hybrid mode of working. Most companies, with a few exceptions, have asked their employees to come back to their respective centres and attend offices physically for two-three days a week. So, complete remote working and related commentaries are now things of the past for the industry.

Disruption called ChatGPT

Generative AI powered tools like ChatGPT has emerged as the new theme that is taking the industry by storm. While IT firms are in a rush to integrate ChatGPT type of tools into their AI applications, employees are ready to be upskilled in this new technology as job fears loom. IBM’s assertion of replacing 7,800 job roles with AI has rung the warning bell, loud and clear.

“Indian organisations have to leverage generative AI for productivity boost given the fact that they are operating in a global context. If they don’t adopt, that can be a problem. No doubt, it will take away jobs relating to repetitive tasks. So, people have to upskill themselves. During the industrial revolution, the disruption happened in the blue-collar job space and this time, the disruption is most likely to happen in the white-collar job space,” Aditya Narayan Mishra, the CEO of CIEL HR Services told the DH.

Dealing with change

Change is quintessential to evolution be it of society or an industry. The rather abrupt transition the Indian IT industry is undergoing presently will put it to test on many fronts. How it rides this latest cycle will determine how it graduates to the next level.