Info-tech

In a first in 10 quarters, TCS’ net hiring declines in Q3

TE Raja Simhan Chennai | Updated on January 22, 2020 Published on January 22, 2020

File photo   -  Bloomberg

The IT firm is trying to tighten its operations after very strong net hiring in recent quarters

For the first time in 10 quarters, Tata Consultancy Services (TCS) has reported a decline in net hiring during the October -December 2019 quarter ― an indication that India’s top IT company is tightening its operations. The total number of employees at the end of the 2019 quarter was 4,46,475, against 4,50,738 -- a decline of 4,263 people.

The previous such decline in net hiring was witnessed in the first quarter of 2017-18 when TCS closed that quarter with a total employee strength of 3,85,809, against 3,87,223 in the previous quarter ― a drop of 1,414 employees.

The decline in net hiring in the December 2019 quarter is a sign that TCS is trying to tighten its operations after very strong net hiring in recent quarters that included aggressive campus hiring in the first half of this fiscal. TCS suggests that it will continue to focus on improving the employee pyramid, going forward, to drive more cost efficiencies, says research firm Emkay Global Financial Services in a report.

 

 

Infosys’ net hiring in Q3 2019 increases

Interestingly, Infosys’ net hiring in Q3 2019 increased by 6,968 and Wipro’s by 5,865.

In Q3, Infosys recruited close to 12,000 people (gross addition) in India and consistently similar kind of numbers the company has recruited in the past quarter, according to UB Pravin Rao, Chief Operating Officer, Infosys. “Right now, we are fairly confident that to a large extent because of our localisation initiatives, we have de-risked the dependence on visa and we will try to provide opportunities for people to go on-site, but we have no control on our visa rejection and approval. We have to live with that,” he added.

Yugal Joshi, Vice President at research firm Everest Group, said that the negative net addition of TCS is a reflection of multiple dimensions. In the September 2019 quarter they did significant hiring with 14,000 net employee addition and over 12,000 in the June quarter. This could be a correction.

“Given the market uncertainty, especially in the BFSI segment, we believe some large deals may not have ramped up the way they planned. This is also reflected in the higher attrition in December quarter. Also, they were pushing for higher margins this quarter (their aspiration of 26-28 per cent) and some of the pruning might have been a result of that.

“I don’t think we should see any concerning trends in this single data point. However, if this repeats across cycles then it will be a sign of strain on the company,” he added.

V Ramakrishnan, Chief Financial Officer, TCS, while discussing Q3 financial results with analysts said, “After the highest ever addition in the second quarter, our hiring moderated in the third quarter.”

Leaving aside the decline in net hiring, in a departure from the past, TCS had front-loaded its fresher programme this year, on-boarding all 30,000 freshers selected through the TCS’ National Qualifier Test in the first half of this year itself, and significantly compressing their initial training duration. “This was an unprecedented achievement in itself,” he said.

Further, the company’s resource management team has successfully deployed 93 per cent of these trainees on projects in Q3, setting a new benchmark in scale and speed of deployment. “We will continue to expand the base with more freshers in the medium-term to re-engineer the cost structure and hasten our return to our preferred operating margin,” he added.

DD Mishra, Senior Director Analyst, Gartner, commenting on TCS’ net hiring said productivity improvement initiatives are taking place in most IT companies as they want to do more with less. This is primarily driven by the competitive scenario of this market and cost remains high on the end user’s expectation along with other factors like operational efficiency and business outcome.

“In addition, intelligent automation has helped in driving this optimisation and we have seen significant improvement in capability and reduction of manual efforts in the last few years. This is a healthy sign when end-user spending on IT services continues to grow at almost 4-5 per cent on average globally. We should expect this to continue for the next few years as automation matures even further and IT companies drive their benchmark to the next level," he added.

Published on January 22, 2020
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