Small ticket deals hitting hiring plans at IT companies

- Usually, IT firms hire in large numbers to man operations for large projects

- Manpower planning requires a flexible approach for shorter, small projects

- Mid-tier IT firms better-placed to do manpower planning

- Employee addition for next fiscal is likely to be subdued

- With attrition moderating, margin headwinds may gradually decline

Bengaluru: Smaller size of outsourcing contracts is making it difficult for many IT services companies to do manpower planning for next year. HR experts said that changing nature of deals require more flexible approach in hiring of employees compared to traditional methods.

Given the current environment, clients are not able to give any indication when hiring will be back in full swing. This is because deal sizes are getting smaller. It doesn't provide a long-term view of manpower planning. In this perspective, flexibility is likely to increase,

-Aditya Narayan Mishra, the chief executive officer of HR consultancy firm CIEL HR Services, told Bizz Buzz.

According to global consultancy firm ISG, deal sizes are getting smaller as many enterprises are seeking quicker outcomes from their engagement with IT vendors. During the third quarter (July-September) of 2022, mega deals touched a five-year low at a combined annual contract value (ACV) of $705 million globally, ISG data showed.

Absence of mega or large deals was also one of the distinct features in the first two quarters of this fiscal. Though most large and mid-tier companies have reported a steady deal pipeline, it came from several small deals than a few large deals.

Usually, companies hire in large numbers to man operations for a large project. However, manpower planning requires a flexible approach for shorter engagements like a small project spanning around few months. In Indian context, mid-tier IT firms are better-placed to do manpower planning for smaller projects as compared to their bigger counterparts.

Meanwhile, market analysts pointed out that employee addition for the next fiscal is likely to be subdued owing to uncertain demand environment.

In the recently announced Accenture results, the company witnessed its quarterly attrition falling to 13 per cent from 20 per cent reported in previous quarter. Accenture's steep decline in quarterly attrition to 13 per cent versus 20 per cent in previous quarter is partly due to seasonal trend of lower attrition in November-quarter but also indicates moderating demand. As we see moderation in attrition, we believe margin headwinds are gradually reducing," ICICI Securities wrote in a note.

Going ahead, many experts feel that attrition for Indian IT companies is likely to fall after staying above 20 per cent level for the last five quarters. Slowing attrition and demand moderation are likely to reduce the need for large scale employee addition in coming quarters.

Indian IT firms are already deferring joining dates of freshers in their bids to match the requirement for manpower as per projects. Against this backdrop, fresher hiring is likely to be scaled down in 2023, said experts.