IT Jobs Demand Hit 20-month Lows

The job market in the IT and enabled services is witnessing a slowdown, post the frenetic hiring that followed the period when India was emerging from the pandemic-enforced lockdowns. Reports suggest that the IT services industry employment demand has shrunk to its lowest levels in the past 28 months. 

Data collated from multiple sources suggest that demand dropped 21% in April compared to March while on a year-on-year basis, the decline was steeper at 54%, says a report published in the ET quoting specialist staffing company Xpheno. The data was reportedly culled out from multiple sources including large enterprises and from LinkedIn. 

The report said data from the employment platform also showed similar trends with job postings reducing by half in the IT services and products sector. Search companies also confirmed that their mandates for hiring from the large IT enterprises have drastically declined by as much as 60% compared to numbers recorded a year ago. 

Looks like the worst isn’t over yet

In fact, some industry consultants believe that the worst isn’t over any time soon as IT companies with broader exposure to the global banking sector could continue a wait-and-watch approach for some more time, given the meltdowns that we are witnessing globally. Of course, the macroeconomic uncertainty in North America and Europe could result in added caution. 

The report quoted Nitin Bhatt, partner and tech sector leader at EY as saying that the banking crisis in the US means that several corporate and retail customers were moving from regional ones to larger banks. He felt this could result in additional focus on infrastructure management services and application management services projects. 

Given that several players are addressing these requirements through using their bench and via automation, the hiring could remain slack. Also digital transformation initiatives in the BFSI sector have also moved into the slow lane, but there are clear signs of a recovery as the economic situation improves and interest rates are pegged back.  

Expect a turnaround in about two quarters

Market analysts point out that the demand slump came post the quarterly results that were mostly below expectations. The Q4 results from the IT services companies did not bring great cheer either to the stock market or to the talent market. And with the outlook seeming to be modest for the coming quarters, the hiring recovery could still be two quarters away. 

Some experts believe that in spite of companies tightening the hiring of freshers, the bigger challenge that is posed comes from the large bench strength that they have. Bhatt claimed that over the past few months, bench strength has gone up by between 200 to 250 basis points across the industry for Indian IT players. 

This resulted in the hiring going soft for the past couple of quarters where companies only brought in mission-critical resources. He feels that till the time these big companies address the issue of bench strength and overcapacity, and receive a signal of growing demand, the hiring trends may remain largely unchanged. 

However, there are those who also feel that the Indian services industry has the resilience to overcome this cyclical downturn given that they have access to a large global market across a broad spectrum of industries. They believe that the current scenario is just a cycle affected by global headwinds and it is only a matter of time before the upward move begins. 

However, there is near consensus that the cyclical shift once again shifts the focus to reskilling and upskilling in the industry that makes the existing talent pool shift from being a bench strength to a billable one. Market analysis proves that the impact of this would be on mid to senior level employees as companies remain unhurried to fill these vacancies.