After TCS and Infosys, Mid-Tier companies like Hexaware and Mindtree face a difficult challenge! Here's Why

COVID-19 pandemic has indeed disrupted business. IT companies have incurred COVID induced losses in the previous quarter. However, this is the first time since the global financial crisis that the mid- sized IT companies have undertaken layoffs and reduced their headcount

According to data of companies such as Mindtree, Mphasis, Hexaware and NIIT Technologies, the reduction in headcount in the first quarter is somewhere in the range of 500- 1,200 employees. These companies have also restrained from hiring freshers. Hexaware has cut down 1,173 employees and the total count of employees stood at 18,825 in the end of June quarter.

NIIT reduced its headcount by 443 and the total number of employees stood at 10,598 by the end of Q1. Mphasis too had undertaken layoffs. Only Mindtree has reported a slight increase in headcount in Q1. The total headcount of employees stood at 21,991 in Q1 as opposed to 21,955 in Q4.

Companies believe this reduction in workforce is happening due to clients reducing or stopping spending, which has decreased the number of projects they receive. “IT companies’ clients are in a flux due to Covid-19, and hence, new deals take longer to close,” Chakraborty, Co-founder and Executive Vice President at human resources firm TeamLease Services told The Hindu Business Line

Other sectors such as travel and hospitality too has been severely impacted. “In some parts of our BPO business, we don’t see demand coming back, and there were performance-related issues overall, which have resulted in the reduction of workforce,” R Srikrishna, CEO, Hexaware told the media.

Anuj Sethi, Senior Director, CRISIL Ratings believes that most of the clients focus on mitigating emerging business risks and reduce IT spending, while permitting existing contracts to continue. 

Reportedly, few employees are also saying that their contracts are getting renegotiated and the idea of automation replacing the labour force is being furthered due to COVID.

“Recently, outsourcing consultant ISG, had pointed to elongated deal cycles and weak deal activity across verticals such as BFSI, as a fallout of the pandemic. This has also put fresh and lateral hires on the backburner as companies are primarily looking to increase utilization which is in the range of 75-80 per cent. During pre-Covid-19 times, Q4 and Q1 were associated with a part of the workforce wanting to pursue higher studies; this year even that has come to a halt,” The Hindu Business Line reported.

In the case of IT majors such as Tata Consultancy Services (TCS), Infosys, Wipro and HCL Tech, all these companies put together have cut down almost 9000 jobs. Additional hiring is happening in very small numbers or has been halted. However, the companies have reiterated that they will honour the job offers and onboarding commitments made to employees before the pandemic.