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How IT Cos are Looking Inward For Talent

The IT sector has the highest growth rate across different industries. This sector contributes 7.5% to India’s GDP. Even when no industries are hiring, the IT sector is always hiring. But, now the times have turned and the hiring trends in the IT sector are shifting. IT companies have always depended on external hiring sprees.

But, the winds are shifting as IT companies are on the lookout for internal talent deployment. This represents the dynamic shift in the resource allocation and workforce management in the workplace. We will delve deeper into this topic and look at all the reasons behind this shift.

Earlier whenever IT companies had any needs for a project, they would embark on a hiring spree. This turned out to be quite costly and time-consuming in the long run. This in the long run caused a big imbalance in the workforce as the projects ended, resulting in under utilization and layoffs when the market is volatile.

In a report from MoneyControl, these are the shifts in the hiring that can be expected in the upcoming financial year.

  • Internal Fulfillment Rate: The internal fulfillment rate for Tier-1 Indian IT services firms is projected to increase to 70-75% in FY24, a notable surge from the 60% recorded in FY23. This suggests a considerable shift towards leveraging existing in-house talent resources.

  • Reduced Demand & Lateral Movement: Factors influencing this shift include reduced demand for IT services, increased lateral movement of employees across projects, and the strategic goal of enhancing employee utilization and operating margins.

  • New Hires: Freshers and lateral hires are expected to account for only 20-30% of the workforce in Tier-1 IT firms in FY24. This is a considerable departure from traditional hiring practices.

  • Headcount Reduction: In the April-June quarter of the current year, four out of five major IT companies, namely Tata Consultancy Services, Infosys, HCLTech, and Wipro, reported a reduction in headcount. This suggests a measured approach to workforce expansion.

  • Optimism & Sales Pipeline Development: Tier-1 companies are approaching hiring cautiously, with a focus on developing sales pipelines. Demand for specialized skills in areas such as cloud computing, artificial intelligence (AI), cybersecurity, data analytics, and digital transformation remains high.

  • Tier 2 Firms: Tier-2 IT companies are adjusting their hiring strategies based on sector-specific demands. These firms are also investing in employee upskilling to address the challenges and opportunities posed by the digital age.

  • Utilization Rate: The utilization rate in the first quarter of FY24 is reported to be lower than the levels witnessed in FY22, with increasing costs and decreased utilization being seen as unsustainable for large companies.

  • Attrition: At Tier-1 firms, attrition is expected to stabilize at 15-17%, with involuntary attrition rising by 6-8%. This increase is attributed to bench retrenchment and skill mismatches.

To fight with the challenging market, IT industries are relying on the internal talent pool to meet their demands. They are focusing more on upskilling their existing employees so that they can grow along with the company. This trend shows that IT companies are navigating this challenging market by making their internal teams stronger and well-prepared to fight with all the challenges that may arise in the future without having to look externally.

(Author: Karishma Chandnani is a Content Writer at TechDoQuest. She offers refreshing & youthful perspective on the topics she writes about).

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