India’s leading information technology companies are divided on the impact of disruptive technologies, such as generative artificial intelligence (Gen AI), on job redundancy. The industry is witnessing a divergence of opinions within its key players regarding the extent to which emerging technologies might replace certain roles.

However, industry leaders argue that their employee headcounts are expected to increase once demand rebounds. In the interim, major companies such as TCS, Infosys, Wipro, and others plan to enhance efficiency by leveraging their current talent pool rather than reducing it.

The Indian IT sector, one of the country’s largest private sector employers, has traditionally engaged in extensive hiring from colleges. However, recruitment in this industry, which boasts a workforce of over 54 lakhs, has been restrained due to sluggish demand. This downturn is a consequence of macroeconomic uncertainty and anticipations of a recession in key markets.

As a result, a continued decline in headcount has been witnessed, on an average, in the past couple of quarters.

Reports suggest that financial year 2023-24 could be the first in 25 years that the $250-billion industry will end up with fewer employees than it started with.

“The reality is that many of us hired aggressively over the last few years… there has been a slow demand environment over (financial year) 2023-24 and I think it’s just the after-effects of that,” Wipro’s Executive Chairman Rishad Premji said on January 18 while speaking to Moneycontrol.

In Q3, India’s top four IT companies reported a reduction of over 20,000 employees. Even in Q2, India’s top three IT companies had reported a decline of over 21,000 in the workforce.

Infosys chief executive officer (CEO) and managing director (MD) Salil Parekh said his company is making sure that it becomes more efficient by not hiring people at this stage in a big way.

“The work that we’re seeing is more focused on cost and automation, and so as the digital, cloud, or Gen AI programmes begin, we will start to see more expansion,” Parekh said, while speaking to Moneycontrol in Davos.

The Bengaluru-based IT services major saw its headcount shrink by 6,101 in the October-December quarter, making it the fourth consecutive quarter it ended with fewer employees.

K Krithivasan, CEO and MD of India’s largest IT company, Tata Consultancy Services (TCS), said the company decided not to backfill attrition and deploy employees internally when it first saw weakness in demand. “So that’s the reason you find that our… fresh recruitment is slower than the attrition,” Krithivasan said in Davos.

TCS’ headcount plunged by 5,680 on a net basis in Q3, which was its second consecutive quarterly decline.

But the Tata-group company is still hiring and any increase in headcount will reflect a demand uptick, Krithivasan said. “Only when we get a much better handle on the demand outlook will I be able to tell you when you would see a positive (headcount); we need to have better demand visibility.”

Nonetheless, all the executives expressed optimism about the long-term prospects of the industry.

“The demand for engineering talent, for programming talent, for design talent, is not going to diminish. So, in the medium to long run, I am very optimistic about the business,” Mohit Joshi, CEO and MD of Tech Mahindra, told Moneycontrol in his first media interaction since taking over the role in December.

Gen AI: Boom or gloom?

While agreeing that headcount will get back on track sooner or later, the executives were split in their assessment of whether Gen AI has already started replacing or making certain job roles redundant. Wipro and HCLTech said this nascent technology is not the reason headcount is reducing. TCS, on the other hand, said the net reduction was a fallout of some amount of “automation” and “production gain.”

Wipro’s Premji said he would “not argue” that the reduction in headcount is because of the elements of “disruptive productivity coming into play on scale” to change the hiring quotient.

HCLTech’s CEO and MD C Vijayakumar had a more nuanced view, saying there are three aspects to determine whether jobs are being made redundant or not by Gen AI. Firstly, he said business process outsourcing will definitely see job cuts. Second, software development will see efficiency improvement by 10-30 percent, albeit at a gradual pace. And finally, managed services and application infrastructure support is already highly automated, being driven by machine learning and hyper automation solutions, Vijayakumar pointed out.

“So effectively, I don’t see this (Gen AI) to be reducing headcount. There’s going to be a lot more work around Gen AI and all of that, I think that will more than offset in the next set of discretionary spends,” Vijayakumar added.

All in all, the IT industry bosses have a positive long-term outlook, though they anticipate short-term challenges stemming from the industry-wide slowdown, translating into a decline in headcount.

Source: GWFM Research & Study