The employment of contract software engineers at Indian IT service companies has declined significantly in the wake of the Covid-19 pandemic.
Most IT firms struggle to cope with their growing inventory (reserve staff not deployed on high-revenue projects) as projects in industries such as hospitality and aviation are canceled, as well as delays in project start-ups and ramp-ups.
According to several people, the cost of employing contract staff, which used to make up 10 percent of the total billable personnel costs of IT companies, has fallen to around 3 percent. IT companies typically use contract workers from HR solution providers or subcontractors. “The use of subcontractors by IT companies is currently low. However, we expect it to rise in the near future as economies open up, ”said Supaul Chanda, Vice President of Experis at Manpower Group. “So far we haven’t seen any layoffs (by the recruitment agencies).
But we cannot have a high bank for a long time. “
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The US-based Manpower Group, together with the Swiss company Adecco and the Dutch company Randstad, are one of the major subcontractors that provide the global IT industry with important human resources. These people play a vital role in helping projects get things done faster, as well as providing a temporary surge in demand, primarily in the US and Europe.
In FY20, subcontracting costs at Wipro were 22 percent of total labor costs, while at Tata Consultancy Services and Infosys they were 3 and 12 percent, respectively.
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Given the focus on cost control by Indian IT companies, HR experts do not expect a significant increase in the use of subcontractors in the coming quarters. All the big companies like TCS, Infosys and Wipro have announced that they will reduce their dependence on subcontractors and use their own resources instead.
“We have the option of rotating our subcontracts (contract employees) and replacing them with our own people. So there are still some levers we can try to improve utilization, ”said UB Pravin Rao, Chief Operating Officer at Infosys, in a telephone conversation with analysts after the profit.