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Infosys, TCS , Tech Mahindra see workforce shrink for the first time in Q1

LiveMint logoLiveMint 01-08-2017 Varun Sood

Bengaluru: The $154 billion Indian information technology (IT) sector, once India’s largest  creator of jobs, is now struggling to even add to its workforce. For the first time, three of the five largest IT companies saw their workforce shrink in the quarter ended 30 June.

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The five firms, which together employed 984,913 people at the end of the June quarter, saw their workforce shrink by 1,821 people.

This development bodes ill for India’s IT industry, which employed 3.9 million people at the end of March 2017, according to lobby group National Association of Software and Services Companies (Nasscom). It also raises a question on whether the Indian IT sector will be able to meet Nasscom’s projection of adding at least 150,000 people in the current year.

Tata Consultancy Services Ltd, the country’s largest software services firm, saw its workforce decline by 1,414 people to 385,809 employees at the end of June quarter, as against 387,223 at the end of the previous quarter. Infosys Ltd saw a net decline of 1,811 people while Tech Mahindra Ltd, the fifth largest company, saw its workforce shrink by 1,713 people.

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Only Wipro Ltd and HCL Technologies Ltd reported net additions to their workforce. Wipro saw 200 employees join the company on the acquisition of Infoserver, and an additional 1,000 employees added to its workforce from one of its clients when the Bengaluru-based IT company won an outsourcing deal in its business process outsourcing business.

India’s sixth largest IT outsourcing company Larsen and Toubro Infotech Ltd, Mindtree Ltd, KPIT Technologies Ltd, Hexaware Ltd and Cyient Ltd, which together employ 77,447 people, added 2,026 employees during the first quarter. This means that India’s 10 largest IT firms added 205 employees in April-June period to take their total workforce to over 1 million employees at the end of June 2017. 

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At the heart of this issue of IT firms finding it difficult to increase their workforce is the fundamental change in the business model that Indian IT companies are wrestling with. It’s as if the world has become digital, and they haven’t (at least, not enough). As IT companies start working on newer technologies such as cloud computing, they are fast moving away from a people-led model, which means they need fewer employees. Meanwhile, many of the IT companies have embraced automation tools to perform the mundane, repeatable tasks that were performed by an army of engineers earlier.

Finally, US President Donald Trump’s protectionist policies and embrace of automation tools by IT vendors have further forced most firms to re-look at their current workforce. 

“What required 50 programmers, analysts or accountants five years ago can be done by a handful of smart thinkers and much smarter systems,” said Phil Fersht, CEO of US-based HfS Research, an outsourcing research firm.

For this reason, many believe that some IT firms will end the current year with fewer employees than they started with. In May, Mint reported that the largest IT firms are already in the midst of the industry’s largest retrenchment drive, with seven of the biggest IT firms planning to ask at least 56,000 engineers to leave this year.

The number is at least twice the employees laid off by the companies last year, reflecting their under-preparedness in adapting to newer technologies and dealing with the fallout from Trump’s protectionist policies.

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