IT firms must use this slump to reinvent themselves

livemint.com:

The Q1FY24 results of the IT industry are the worst in recent times in terms of revenue growth and profits, but there's no reason to feel too downbeat. The guidance of the ‘Big Four’ – TCS, Infosys, Wipro and HCL Tech – indicates that FY24 could be a fallow period that the IT industry could use to regroup and consolidate. While things are bound to get better as global growth improves, a big rebound doesn’t seem likely in FY24.

All four majors had relatively flat Q1s in terms of revenue and profit growth. All four deferred wage hikes, and have negative or flat guidance and expectations (TCS doesn’t issue guidance) for near-term revenue growth. Infosys cut its revenue growth guidance in FY24 from 4-7% per cent to 1-3.5%.

Wipro indicated that Q2 FY24 could see a fall in revenue and warned margin compression is likely in the second half of FY24, as and when it implements the deferred wage hikes. HCL Tech maintained full-year revenue expectations despite a weak Q1, well below Dalal Street’s expectations. The TCS management said expectations had not changed.

On the positive side, all four saw a fall in employee churn or “attrition rates" as it’s called. Combined with deferred wage hikes, lower attrition indicates the rest of the IT industry isn’t hiring at any great pace, since higher attrition rates correlate with better offers from other firms. Anecdotally, the startup industry has seen a fall-off in activity, which also means less demand for software engineers.