Small city hiring may face speedbumps as IT firms struggle amid AI adoption, Trump tariffs

- Cities like Vizag, Udaipur, Warangal, Lucknow, Bhubaneswar have seen rise in hiring

- Many IT firms have announced headcount addition in recent years

- With core business under threat, these initiatives are likely to be pushed to back burner

Bengaluru, 1 August

Top IT services firms are likely to go slow in headcount addition in tier-II cities owing to the ongoing business uncertainties.

Industry observers are of the opinion that given the pressing issues at hand, expanding in small centres is expected to lose focus in the coming quarters. Against this backdrop, though many top IT firms have committed to set up new centres or expanding their existing one in tier-II cities, they are unlikely to follow up in the near future.

“Indian IT companies are facing AI-led disruption and second-order impact of US tariffs on its trading partners. So, they are likely to more focussed on core business concerns at this point of time. So, it is likely that expanding in tier-II cities may not remain a priority (as of now),” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting told the BizzBuzz.

In the last one year, cities like Udaipur, Vizag, Warangal, Lucknow, Bhubaneswar and Indore among others have emerged as sound job creators in the technology industry.

According to a Teamlease report, tier-II and tier-III cities have seen a more than 50 per cent increase in hirings for technology roles during the January-June period. In contrast, the tier-I cities, which include Bengaluru and the National Capital Region, posted 12–15 per cent growth.

While Coimbatore, Nagpur and Nasik are growing around 20–25 per cent year-on-year, Indore and Jaipur are recording 30–40 per cent growth in IT hiring, the report noted. This spectacular growth has been seen in the post pandemic period as remote working has gained momentum. IT firms have expanded their small centres or set up new centres in their bids to improve operating margin as the wage cost in these centres are relatively low with low attrition levels.

All big companies including TCS, Infosys, Cognizant, & others have announced plans to set up new centres in recent years. For instance, Cognizant in June this year has said that it will set up a new centre in Vizag, which will lead to employment of 8,000 people in phases. Similarly, many other companies have announced expansion of their centres in small cities.

“When AI is making deep inroads, hiring numbers are not likely to be a similar level as it used to be. In this perspective, adding employee count seems difficult in small cities,” said an industry source.

Sources in the know said that these big campuses may be turned into real estate investment with a part of it leased out to other companies.