For once, software majors Tata Consultancy Services and Infosys Ltd had something in common in the first quarter of the current financial year. The net employee hiring for both dropped to the lowest in the last four years.

The proposed US Immigration Bill and better employee utilisation could be reasons for this, say analysts tracking the software sector.

Net employees addition for TCS was just 1,390 in the first quarter – its lowest in the last 15 quarters. The previous lowest net was (minus 312) in the second quarter of 2010-11 which saw more leaving the company than joining. Infosys hired only 575 people in the first quarter of the current financial year. Its previous low (minus 945) was in the first quarter of 2010-11.

Key factor

The low hiring might be part of a wait-and-watch policy on the part of service providers, given the way the visa reform Bill is moving in the US. The proposed immigration Bill will have to be factored in when working out hiring plans. TCS, for example, hired around one-third of the last quarter's recruits from locations outside of India, said Chirajeet Sengupta, Practice Director, Everest Group, a research firm.

S.D. Shibulal, CEO and Managing Director, Infosys, in an analyst call said that employee utilisation in the first quarter moved to 74 per cent from 71 per cent quarter-on-quarter. The company added around 10,000 people (gross) in the first quarter. At the same time, the net addition was 575. “Our aspiration is somewhere between 78 per cent and 82 per cent, which will be our optimum utilisation.”

The company last year gave nearly 5,000 offers for people to join this year. “If I apply 80 per cent conversion rate, between 3,500 and 4,000 people will join this year,” he said.

Seasonal effect

Sid Pai, Partner and President of ISG’s Asia Pacific, said the reason for slow hiring could be partially a seasonal effect but also a slowdown in decision making.

When asked whether the trend was a sign of bad times ahead, Pai said, not necessarily. More of their business nowadays is converting to non-linear, which does not have a direct relation to number of employees.

In fact, ISG data suggest that the last quarter was a poor oneoverall for outsourcing in general globally in terms of number and value of deal closings. That said, pipelines are healthy with a lot of renewal activity so the second half of the calendar year may be a strong one, he said.

(This article was published on July 22, 2013)
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