TCS headcount drops as it leaves many roles unfilled
company’s top executive defended the dips, saying headcount ups and downs are a product of utilization and not revenue.
“We continue to drive efficiencies, we continue to look at where we can better deploy our associates and where we can take the trainees ahead of time. So, maybe in, let’s say, Q1 or Q2 we take trainees or headcount may go up, but the training process may take about six months or nine months before we start deploying them,” K. Krithivasan, managing director and chief executive officer (CEO) of TCS said in response to a Mint query during the results last Friday. “So, to say that this quarter, the headcount went up so the immediate next quarter the revenue should go (up), may not be a correlation.”
“The era of revenue-up coinciding with an increase in headcount is fading out,” said the head of a Bengaluru-based recruitment firm that hires for TCS, on condition of anonymity. “There will be further dips in manpower going ahead across IT services once more AI-driven processes come in. The need will be only for more specialized skills.”
TCS is already looking for specialists on an urgent basis, to the extent that it recently started offering vendors ₹40,000 per candidate over and above their regular fees if they manage to make senior candidates join in less than 30 days. The urgency to get experienced employees in programs like Flutter, Windchill, Workday, and SAP, among others, is a sign that markets are opening up for the IT services firm.
However, despite the advanthe achieved in the previous fiscal. However, the management was still a tad shy from acknowledging if growth will be in doubledigits. TCS, which does not give forward-looking guidance, has maintained that it aspires to clock a double-digit growth.
“Headcount declined sequentially for the third straight quarter and finished down in FY24 vs FY23, which all else equal is not encouraging for demand inflection,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a note dated 12 April. “Net, we think the spend environment could improve in 2HCY24, though we believe there remains uncertainty on the slope of improvement especially given ongoing macro uncertainty including US interest rates.”
At the heart of this scepticism is the fact that two-thirds of TCS’s business grew less than its headline 4.1% growth last fiscal. North America, which accounted for 51% of its $29.1 billion in revenue, fell 2.3% from FY23, as customers continued to hold back from spending more on IT-related outsourcing work for a clutch of reasons. And its biggest business vertical—banking, financial services and insurance (BFSI), reported a de-growth of 1.3% and accounted for 32% of total revenue in FY24, compared to 33.3% in FY23.
Traditionally, fall in headcount has been associated with lower earnings for IT companies, and vice-versa