India’s information technology (IT) services sector is undergoing significant changes as companies reassess their bench policies in response to decreasing project demand. Major firms, including HCL Technologies Ltd, Cognizant Technology Solutions Corp., Tech Mahindra Ltd, Infosys Ltd, and Wipro Ltd, are reevaluating their approach towards employees who are presently not assigned to active projects. Notably, some organizations have established stricter timelines, allowing employees to remain on the bench for no more than two months before they are compelled to transition or seek alternate opportunities.
According to insights shared during post-earnings calls, Sandeep Kalra, the Chief Executive Officer of Persistent Systems Ltd, emphasized the importance of providing a career path for employees, noting that extended periods of inactivity could encourage talented individuals to seek employment elsewhere. This shift in policy is indicative of a broader trend within the technology sector, which has been experiencing a slowdown following the unprecedented hiring surge seen during the pandemic.
Several companies have reported that the reduction of bench size is a response to shrinking demand from influential Fortune 500 clients, which contributed to the Indian software services industry’s growth rate declining to 3.8% in the fiscal year concluding in March—a stark contrast to the previous employment drive. K. Krithivasan, the CEO of Tata Consultancy Services, corroborated this by highlighting that clients are frequently reconsidering their project commitments at short notice, while Wipro’s Srinivas Pallia noted a cautious stance among clients towards discretionary spending.
The realization of lower demand has prompted IT firms to streamline their workforce, with many companies indicating a need to run leaner operations. Historically, employees on the bench could expect to remain for up to 120 days, whereas this has now been curtailed to approximately 60 days. Performance ratings play a crucial role in determining how long an employee may stay benched, with higher-rated individuals afforded slightly more time to secure a new project. Conversely, those with lower performance assessments may find themselves leaving the organization sooner, as articulated by an employee from HCLTech.
As a result of these modifications, companies are witnessing improvements in utilization rates—the proportion of employees actively engaged in projects. For instance, firms such as Infosys, Wipro, and LTIMindtree Ltd have reported an uptick in utilization rates, with figures ranging from 83% to 85%. It is noteworthy, however, that Tech Mahindra observed a marginal decline in its utilization rate.
Overall, while the drive to optimize operations stems from a need for cost-saving measures, industry experts, including Krishna Vij, Vice President of IT Staffing at TeamLease, remark that the primary intention is to enhance employee engagement and continuous skill development to align with dynamic market requirements. Collectively, these trends suggest a marked impact on employment within India’s IT sector, evidenced by a reduction in the workforce at major companies such as Tata Consultancy Services, Infosys, and Wipro, which together experienced a decline of 63,759 positions in the year concluding in March 2024.
In conclusion, as the Indian IT services industry grapples with uncertainty and reduced demand, the strategy of minimizing bench size and enhancing employee utilization appears to be an essential response to an evolving economic landscape. These adjustments reflect a broader commitment to maintain operational efficiency while fostering a culture of continuous engagement and contribution among employees.
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