Accenture to cut 19,000 jobs! Will Indian IT see spillover effect?

IT major Accenture announced on Thursday that it would be slashing 19,000 jobs across its global operations. This comes in as the company lowered its growth and profit projections in its earnings call amid recessionary fears and global headwinds. Indian IT companies, like TCS, Infosys, Wipro, Tech Mahindra, and others, have also been sharing similar management commentary since the past few quarters. Does this mean similar cutbacks can also be expected at Indian IT majors?

Aggressive hiring in anticipation of growth

The layoff exercise at Accenture comes on the backdrop of aggressive hiring in the past 2 years in anticipation of growing demand. 

Aditya Narayan Mishra, Managing Director and CEO of CIEL HR Services told Business Today, “Accenture increased its workforce by 40 per cent in two years anticipating huge demand in the IT/ITes sector. It has not been able to justify this increase in its workforce with its revenue numbers. As a publicly-traded company, investors are likely seeking cost optimisation measures, leading to the current layoffs.”

The growth in demand did not materialise as expected due to the rising inflation rates and impending recessionary fears.

Shantanu Rooj, founder and CEO of TeamLease Edtech told Business Today, “During the Covid-induced digitalisation optimism, most tech companies overhired and overstaffed themselves expecting a demand boom. Though that boom did come, the impact of soaring inflation and increase in global interest rates brought a fear of an impending global recession.”

Hiring at Indian IT companies

Similar aggressive hiring practices were observed at Indian IT companies as well. Tata Consultancy Services (TCS) hired 1,03,546 during FY 2021-22, recording the highest number of net employee additions in a single year by an Indian IT company. In the same time period Infosys witnessed net employee addition of 54, 396; Wipro hired 45,416, and HCL Technologies hired 39,900 employees, all unprecedented numbers in the history of Indian IT companies.

Job cuts at Indian IT?

Does this mean it's time to expect job cuts at Indian IT companies as well? In all likelihood, yes. Mishra explained, “ This development will undoubtedly impact some Indian IT workers as well.” 

It is worth noting that the aggressive hiring at India’s major IT companies in the last two years has left a remarkable bench size and several hundred employees waiting to be onboarded at companies like Wipro, Infosys, TCS, Tech Mahindra, Mphasis, Capgemini, LTI Mindtree, among others.

Skill shift in workforce as company priorities change

But some industry insiders are still optimistic. They believe that current developments hint towards a shift in skills which are in demand as IT companies realign their priorities.

Yeshab Giri, Chief Commercial Officer of Randstad Technologies told Business Today, “Indian tech companies are currently undergoing significant restructuring in their workforce to manage costs effectively amidst recessionary trends in the west. This might cause temporary pains as companies adjust to the sudden change in the macro-economic environment.”

“There is a slight shift in the hiring preferences of the recruiters who seek to navigate the unforeseen increase in demand for IT and allied services from the international clientele,” Giri explained.

He added that the realignment of priorities of Indian IT companies will “create enough opportunities for relevantly skilled talent to find employment in India.”

Indian IT: An outsourcing opportunity

Others see further boom in Indian IT as globally companies try to manage costs and outsource IT operations to emerging markets.

“In the near future we expect the IT outsourcing demand going up in India,” Rooj from TeamLease added.

The CEO of CIEL HR explained, “In an effort to reduce costs, companies across the world may outsource some projects and jobs to India, where the cost of employees is lower compared to those as compared to developed economies.”

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