IT Slowdown in Q2 Expected, but Hiring by Global Capability Centres Provides Respite
The IT industry is facing a slowdown in the second quarter of this fiscal year, but there is hope for improvement in the second half. Domestic IT companies are being cautious in their hiring practices due to the challenging macroeconomic climate, which is impacting their demand for staffing firms. However, there is a silver lining as hiring by global capability centres (GCC) of multinational firms remains strong.
GCCs, also known as captives, are offshore units of multinational corporations that handle specific functions exclusively for the main company. These GCCs are either setting up operations or expanding their existing ones in India, which has led to an increase in demand for staffing firms. This provides some respite for staffing companies that have been hit hard by the slump in demand from the domestic IT sector.
Guruprasad Srinivasan, the CEO of Quess Corp, a staffing firm, stated that they are working with GCCs that are expanding in India or entering the country for the first time. This has resulted in a lot of positions being available for staffing firms. However, Srinivasan also mentioned that there has been a significant decrease in this area, with open mandates down by 60 percent.
Hitesh Oberoi, the CEO of internet company Info Edge, which runs the recruitment platform Naukri, expressed that while hiring from core IT clients has been challenging and impacted the company’s billings growth, they have observed momentum from captives. Although captive hiring is still a small fraction of overall IT hiring, it has been a source of growth for the company.
A Deloitte survey revealed that India is the most preferred location for a global shared services hub, supporting the growth of GCCs. It is estimated that India will have over 2,000 captives by 2026-27, according to a Nasscom-Zinnov report. This growth in GCCs is expected to provide new opportunities for job seekers with niche skills such as generative AI, data analytics, cloud computing, and DevOps.
Although there are positive signs from GCC hiring, there is still uncertainty regarding whether the slowdown in IT hiring has bottomed out. Sunil Chemmankotil, the CEO of Teamlease Digital, mentioned that while the requirement for IT services customers has dropped significantly, they have seen some green shoots with GCCs and non-tech clients. Chemmankotil also highlighted that GCC hiring volumes cannot be compared to IT hiring, but GCCs offer better margins.
Teamlease is targeting GCCs as potential customers for growth. Ashok Reddy, the Managing Director of Teamlease, stated that they have been pursuing GCCs and identified them as a big opportunity for near-term growth. They have started working with GCCs and building traction on their requirements.
The Indian Staffing Federation has also noted the significant growth potential of GCCs for IT staffing companies. Lohit Bhatia, the President of the Indian Staffing Federation, mentioned that there have been active conversations with global majors looking to ramp up their GCCs in India or establish new ones.
Looking ahead, there is an opportunity for Indian IT companies in generative AI. As advancements in machine learning and AI continue, there may be increased outsourcing of jobs to India, resulting in more hiring in the Indian IT market. This could further boost the demand for IT professionals with expertise in generative AI.
In conclusion, while there is an expected slowdown in the IT sector during Q2, the hiring activities of GCCs have provided some relief for staffing firms. The growth of GCCs in India presents new opportunities for job seekers with specialized skills. However, it remains to be seen whether the slowdown in IT hiring has reached its lowest point. The industry is keeping a close eye on generative AI as a potential area for growth in the near future.
