Nearly a year back, I ruminated in a blog post on the hiring fever for tech talent. The trend of techies getting a swarm of job offers at stratospheric salaries stunned me. I wondered when this hiring frenzy would moderate. Over the next few months, the hiring momentum got red hot, snowballing into a never-seen-before talent war. People started quitting jobs in droves, leading to a phenomenon called ‘The Great Resignation’. The focus for most tech entities then, big or small, was on talent retention.
Cut to the end of June 2022, and the tables had turned. The scene in tech hiring now is the antithesis of what we experienced a year back. Global big tech companies are either laying off workers or going slow on the hiring pedal. Who could have anticipated a year back that Microsoft would shed one per cent of its total workforce pool of 180,000? Or Netflix laying off 300 employees – 4 per cent of its workforce strength. Meta has announced scaling back hiring of engineers by 30 per cent this year. Its CEO Mark Zuckerberg feels the world may be heading towards one of the worst downturns in recent history.
The concerns are not cooked up. Raging inflationary pressures, global headwinds and geopolitical stability stemming from Russia’s unprovoked invasion of Ukraine have sent shivers down the spine of tech giants. Consumer Price Inflation (CPI) in the US reached 9.1 per cent in June; it’s the highest in 40 years. The inflation crisis in the Euro Zone is no less unnerving. Big Tech companies are wary of an impending recession and have fastened their frugal belts. There’s talk that tech companies might need to borrow to sustain their high growth trajectory. But that option isn’t feasible as interest rates are moving north. The piecemeal remedy is to contain costs. Tech companies are doing it with layoffs. Structural adjustments and resource alignments are euphemisms for cost-cutting.
For Google, ‘scarcity breeds clarity’ as the search engine behemoth plans to slow the pace of hiring for the rest of the year. Indian IT companies have seen the domino effect. Employee wage bills soared as firms paid through the nose to onboard the best talent. In India, the IT sector alone accounts for nearly 54 per cent of the total employee cost. IT companies are facing a stern challenge – how to manage talent amid shrinking margins. The strain on their finances shows up in their subdued hiring in the June quarter. 2021 was an astounding year for new hires. 2022 is muted to start with.
Top IT service providers like Accenture, TCS, and HCL Technologies sharply reduced hiring in the June quarter. During April-June, Accenture hired 12,000 – only 30 per cent of the 40,000 recruited in the year-ago period. TCS hired 14,136 people, down from the average quarterly hiring of 26,000 in the last fiscal. It’s unclear if the IT companies will accelerate hiring in the subsequent quarters. But the pressure is palpable. The US and the EU, the two biggest markets for IT vendors, are in the grip of runaway inflation. Clients in these geographies are already dreading a recession. IT companies are in a wait-and-see mode on new recruits. For start-ups, the party is losing its lustre. Their funding winter has begun sooner than anticipated. The heady days of dangling ESOPs and 50-60 per cent pay hikes to recruits are passé. Start-ups realise they need to carry on with leaner budgets. And they are now diving into the pool of retrenched employees to get new hires.
The signs are evident. The job market for techies has mellowed. The Great Resignation is petering out gradually. IT ecosystem now needs to revert to the basics with a dash of out-of-the-box thinking. The best bet is on upskilling and reskilling your workforce to meet on-demand skills – this will help prune 20-30 per cent costs compared to hiring from the open market. It also makes your STEM (Science, Technology, Engineering & Mathematics) talent more productive. Companies like TCS and HCL have introduced a skill-based curriculum for engineering students to burnish their skills. Adopting a ‘glocal’ strategy helps too. Thinking global while hiring local can scale down costs without a dent in productivity. Borderless hiring with co-working spaces is the latest toolkit to combat the talent war without burning much on cash. Local talent also reinforces a company’s footprint and establishes a direct interface with the clients in the enterprise or government domains.
The gulf between demand and supply of digital talent still exists. The positive takeaway is that the wave of The Great Resignation is subsiding. It will help the tech companies to have business continuity without fretting about costs. The bigger worry now is to sail through the wave of another dreaded recession. Indian tech firms, though, are in a better position to weather the recession storm as they have made massive investments in digital transformation in a post-pandemic world. Everyone may face the same storm, but not everyone is in the same boat.
The writer is Founder & CEO, CSM Technologies. Views are personal.