Improvement in business sentiment key to hiring in tech industry

The technology industry had to brave several challenges on the hiring front in 2023. It was to such an extent that new employee additions came to a grinding halt across sectors, including IT services companies and technology-enabled startups. Though technology captives or GCCs (Global Capability Centres) emerged as the only bright spot, hiring numbers were not large enough to move the needle.

This was made worse with many global technology giants freezing new hiring. The big tech pack of ‘FAAMNG’- Facebook (Meta platforms), Amazon, Apple, Microsoft, Netflix and Google (Alphabet) - companies in India registered a 90 per cent drop in active job postings in India in 2023 compared to 2022. Notably, these global technology giants run large technology centres in India, which drive cutting-edge innovations for the world. No wonder, the headcount of these companies in India is also substantial. Earlier this year, the FAAMNG companies had announced mass layoffs.

Reports indicate that more than 10,000 staffers lost their jobs owing to such layoffs. Sources in the staffing industry said that many of them had to wait for a few months before getting absorbed in other companies. Though things have stabilised in these firms, the hiring freeze continues. The indications are that in all likelihood, this hiring trend will remain so even in 2024.

Given the macroeconomic environment and fall in business growth witnessed by these companies, the coming year may not see much change. Not only IT firms and global tech giants, even hiring in the GCC space is likely to stabilise in the coming year. Technology captives of global enterprises have seen good growth in the current year. With insourcing reaching its optimum, hiring is likely to slow down in 2024. Apparently, the best bet lies with the IT services companies.

Global IT firms are considered to be mass employers of Indian engineers. Therefore, it is critical that these companies will begin hiring on a faster note. But for this to happen will depend on sentiments. Currently, the business sentiment in key geographies is way below. Experts are of the opinion that businesses are sitting on cash but are not ready to deploy because of fears of uncertainty. Once sentiment improves, spend on technology will be the first to come back.

In this context, it is important that business sentiment improves in the coming quarters. The US Federal Reserve’s decision to cut interest rate in 2024 can work as a booster for the entire industry. Though it takes time for the effective cut in interest rate to reflect, still if this happens, technology spending will come back, albeit with a lag.

Secondly, Europe as an economy has fared better than the US in 2023. If both key geographies see improvement in spend, hiring numbers will definitely rise. Usually, employee addition is seen as a lead indicator of demand improvement. Therefore, if we see a rise in headcount towards the second half of 2024, then 2025 will be seen as good year for the technology industry. Till that happens, 2024 is likely to be a year of transition for the technology industry.