Why India’s IT giants are shunning costly consultants

livemint.com:

From Wipro to LTIMindtree, IT employees irked by another delay in salary hikes Subcontractor costs for Tata Consultancy Services Ltd, India’s largest IT services company, dropped to 4% of its operational revenue of ₹62,613 crore in the June quarter, its lowest since October-December 2019, when its temporary worker costs accounted for 7.9% of revenue. For HCL Technologies Ltd, this figure dropped to 12.6% from 14.8% in the same period, and for Wipro Ltd, to 11.3% from 14.7%.

“The drawdown of subcontractor expenses is driven by the ongoing contraction of discretionary spending," said Peter Bendor Samuel, chief executive of Everest Group, a Dallas-based IT research firm. “Discretionary spending often requires contractors to add expertise and onshore capabilities.

As this spend has been reduced, the need for contractors also is reduced." TCS, HCLTech and Wipro did not reply to queries emailed on Sunday. For Infosys Ltd, India’s second-largest IT services company, subcontractor expenses as a percentage of its revenue in the June quarter was about 8.1%, higher than the 7.5% in October-December 2019.

Infosys has let go of a significantly high number of permanent employees over the past two years even as it won many mega deals, making it necessary for the company to hire consultants where their clients’ projects are located. Infosys didn’t reply to Mint’s queries.

TCS has also won a large number of mega deals over the past two years, but has managed to strike a balance between employee-hiring and contracting consultants. Also read | Why TCS boss Krithivasan is unafraid of GenAI, but unwilling to say the worst is past “They (TCS) prefer to grow their own talent and have further focused on reducing contractors to keep cost low,"