After a lull, IT hiring mandates are up 10% in July

After months of slowdown in tech hiring, the IT sector has started seeing some green shoots of demand starting July, according to staffing firms. There has been a 10% increase in the overall hiring requirements in July compared to last month, they added, signalling good news for the IT sector and some pick-up in demand in the coming quarter after a long lull.

The growth in headcount, however, will only be reflected in the October-December quarter, said experts. The increased demand is led by companies having better visibility of demand. Despite the pick-up, the rate of recovery is still slower than anticipated, and significantly lower than the peak demand witnessed in 2021, they added.

“IT services are expected to open up in this quarter to some extent. This is as hiring has been on the back burner for quite some time and utilisation levels have peaked to over 80-85%,” said Sunil C, chief executive at TeamLease Digital.

The global capability centres (GCC) and engineering research and development (ER&D) demand flow has been steady, said Sunil, adding that there is a 10% increase in the overall hiring requirements in July compared to last month.

Saravanan Balasundaram, chief executive of staffing firm Handigital, said that the current uptick in demand has only started in the past two-three weeks and will likely result in offers only in the October-December quarter. “From barely any recruitment drives over almost two quarters, we have seen almost five to six recruitment drives planned by companies for lateral hiring in the past three weeks,” said Balasundaram.

He added that this indicates some breakthrough in hiring mandates from IT services clients and will be reflected in headcount numbers for the fiscal third quarter. That said, the second quarter of FY24 headcount growth is also expected to remain flat.

AR Ramesh, director – managed services and professional staffing, Adecco India said that there has been a slow uptick of demand in the IT sector over the past two-three months although this recovery is still delayed.

“We are witnessing encouraging signs of demand recovery after nearly 18 months of declining demand. While we anticipated this rebound to occur earlier, we anticipate positive hiring sentiment in the current quarter. Over the past few months, there has been a notable improvement in the demand situation, with a growth rate of approximately 30% overall. This growth translates to an average monthly increase of around 10%. However, it is important to note that this level is still significantly lower, comprising only about 15% of the peak demand surge witnessed in 2021,” he said.

ET had reported in June that IT services headcount growth in the April-June quarter is likely to remain flat- as it was in the January-March quarter due to the ongoing macroeconomic pressures in the biggest markets for the sector.

In addition, hiring across global capability centers has been on the rise with more global work being shifted to India to tap into the higher volume of skilled resources available here.

IT industry bellwether Accenture’s utilisation rate stood at 91%, flat sequentially, for the March-May quarter.

Teamlease Digital said the uptick is a combination of all streams – IT services looking at replacement hires and not going with their benched employees, and improvement in GCCs and tech hiring in the non-tech sector.

Naozer Dalal, chief executive of Allsec Technologies, a subsidiary of staffing firm Quess, also added that any recovery potential is only possible in the latter half of this fiscal.

“We have not seen any significant signs of recovery in June. It is our view that customer and market sentiment will remain largely flat in the July-September quarter before potentially improving in the second half though it is too early to predict the pace of the recovery,” said Dalal.