Projections On Hiring Prospects In The IT Sector May Go Awry

Zoho Corporation's co-founder Sridhar Vembu has sparked a debate on hiring prospects of IT engineers going ahead. He did so with a post on X platform that read “What is ailing the software job market is not AI taking away jobs (not yet anyway),” adding that massive overcapacity has built over years in the IT industry. According to his theory, this overcapacity has been created due to massive amount of funding by VC, PE & IPO money.

“Software vendors applied liberal doses of marketing spending to spread fear (of missing out) and uncertainty (tech is changing, you need us) and doubt (are you confused? trust us) among corporate customers and the result was ever growing IT spending.” He argued that big corporations in the west have layers and layers of duplicated IT systems, prompting them to spend more on technology. Everyone may not agree with this argument but there would be varied opinions on matter. However, one fact that has to be accepted is that headcount addition in the last one and half years has slowed down in the Indian IT industry.

Net headcount of top five Indian IT firms- TCS, Infosys, HCLTech, Wipro, Tech Mahindra- declined in the December quarter of the ongoing financial year. TCS, Wipro, and Tech Mahindra reported drop in their total employee base, while Infosys and HCLTech witnessed net additions. A similar trend was also seen among mid-tier IT firms. While some witnessed headcount addition, many saw a drop in their employee base. Importantly, there are indications coming from the management of IT firms that the linear relationship between revenue growth and headcount addition is shrinking. It means that Indian IT firms may not require as many people as they used to in order to improve their revenue growth. And there are some reasons cited for the same. Firstly, advent of AI and generative AI is helping companies to automate many of their processes and operations. Owing to this, entry level jobs are becoming redundant. If such automation continues, then hiring of freshers is likely to be low or there may be recruitment of skillsets that are different from the current ones.

Secondly, uncertainty in the global economy, especially in the US, has already compelled IT firms to be on a wait and watch mode. They don’t want to undertake hiring where sticking to the commitment may be difficult. In this context, hiring in 2025 may be lower than the projected figures. Meanwhile, the argument that enterprises in the US and other western nations are sitting on piles of irrelevant software stack, is debatable. Many may argue that technology spending goes through multiple layers of evaluation. So, any wasteful investment without matching returns will not continue for indefinite period without scrutiny. On that count, the logic that much of the technology spending is wasteful, may not hold water. It is quite likely that the prediction of doomsday in hiring by the Indian IT sector is a pessimistic-driven exaggeration. Though AI will replace some jobs, there is no indication yet that redundancy would create any significant disruptions.