The results announced by the three large IT companies – Infosys, TCS and Wipro – indicate that they are facing a challenging environment. Infosys’ revenue grew just 1.4 per cent in FY24, much lower compared to the growth of 15.4 per cent in FY23. TCS recorded a revenue growth of 3.4 per cent while Wipro recorded mild decline in the revenue for last fiscal year. The companies have cited growing macro-economic and geopolitical uncertainty, shifts in the digital transformation cycle and reduction in discretionary spends of clients as a reason for subdued growth in FY24. It is a matter of concern that Infosys and Wipro have given a guidance of muted growth in FY25 too, although they are betting on a few large deal wins to help them tide over this challenging phase.

As a result of slowing demand conditions, increasing competition and inflation in salary bills, companies are struggling to maintain their operating margins. As the focus on cost efficiencies increases, companies are choosing to reduce the number of employees on their rolls by cutting down on fresh hiring. For the first time in the last two decades, all three companies have closed the fiscal year 2023-24 with fewer employees, when compared to the beginning of the fiscal year. TCS, which has an employee strength of over six lakh, reported a decline of 13,249 in its headcount in FY24. Infosys and Wipro have reduced their employee strength by more than 24,000 each. This trend was evident through 2023 as IT companies cut back on campus recruitments. This clearly does not bode well for white collar job creation in the country. The IT and allied industries are among the most significant employers of engineering graduates, absorbing almost three lakh fresh recruits annually, which amounts to around 20 per cent of the fresh engineering graduates passing out every year. Annual increments of the existing workforce is also likely to be lower as companies try to reduce their salary bill. This will impact overall consumption since the IT workforce contributes significantly to demand for aspirational goods, real estate, automobiles, entertainment and travel.

Going ahead, with many of the IT functions likely to be performed with the help of artificial intelligence, jobs could shrink further. This is the right time for engineering students to explore employment opportunities in other sectors such as manufacturing and construction. Colleges too should take note of the shift and work with industry to design courses that help students get jobs in a more diverse range of sectors.

Another noteworthy trend in the results of the IT majors was the stress in North American region, which accounts for over half their revenue. The big three companies recorded a decline in their revenue from the US, a sharp reversal from the robust double-digit growth in previous fiscals. Revenue from Europe was sluggish. Going forward, companies will need to increase the share of revenue from the domestic market, where many companies are still to upgrade their systems, the Middle East and other Asian countries.