IT services sector vacancies drop to 17-month low in Sep

September was also the worst month across sectors with active job openings falling to 210,000 from 260,000 in August, Xpheno said in a report. Monthly average active jobs for this financial year through March has now fallen below the 280,000 mark in the sharpest decline since March 2020.

Anil Ethanur, co-founder, Xpheno, said the September performance is the result of a gradual decline led by rising inflation concerns, both in the local and key client markets. “The IT sector over-hired during the buoyancy since last year. The current dynamics of hiring action are clear indicators of a correction in a previously overheated job market,” he said.

The IT services sector recorded a 27% sequential decline in active job volumes in September. “IT services and software service sectors registered drops by 13% and 42%, respectively. A drop of 35% was recorded by internet-enabled services and startups, which closed with 13,000 openings, as against 20,000 in August 2022,” the report added.

To be sure, analysts said a slower hiring pace by IT services firms was expected as sectors such as hospitality, which suffered the most during the pandemic, have returned to favour among employees.

Akshara Bassi, research analyst for global cloud and servers markets at market researcher Counterpoint India, said a key reason for the slowdown could be the distribution of IT order books. “Most of the IT orders came through the pandemic years. With the slowdown in order books and reducing attrition levels, hiring has seen a slowdown in the IT sector, which is in line with global cues. Particularly in the technology and IT sectors, employers have slowed down hiring as project demand reduced from the previous years,” she added.

Attrition is set to hit the bottom rung this year, Bassi added. Mint reported on 12 October that IT attrition will remain high at 20% in the near term. “Employers and employees are both likely to remain hawkish on jobs, so both attrition and net job additions should stabilize going forward,” said Bassi.

During Infosys’ quarterly earnings conference on 13 October, Salil Parekh, chief executive, said the drop in net hiring is not a major concern, thanks to a “robust large deals pipeline” and the September quarter is “historically slow for net job additions”. Infosys, incidentally, reported the lowest decline in net job additions among India’s big three tech services companies in the quarter ended September.

Quarterly earnings of IT service majors have reflected the downturn in net addition of new employees, too. For instance, Tata Consultancy Services (TCS), India’s largest IT service firm by revenue, saw net headcount additions halve to 9,840 in the September quarter from a year earlier. Infosys’ quarterly net job additions fell 14% from a year earlier, to 10,032 in the quarter. HCL, too, reported 25% dip in net job additions. Analysts said the subdued hiring in the September quarter is a reflection of the slowdown in key sectors. Omkar Tanksale, equity research analyst, Axis Securities, said cautious client approach in borrowing in heavy sectors like banking, financial services and insurance, which form a key client base for Indian IT firms, may lead to a slimmer order book and intensify short-term concerns.

Xpheno said the IT sector’s contribution to overall job openings dropped 58%—the lowest in 30 months—from more than 80% last year.