The period of strong IT hiring momentum in 2021 and early 2022 can be attributed to a variety of factors, such as a rebound from the pandemic-related economic slowdown, increased demand for certain types of skills, talent shortage, and technological advancements. Riding on the tailwinds of a strong economic outlook, companies remained optimistic, and this led to a wage war where companies offered higher salaries, bonuses, and benefits to cherry-pick the right talent or lure candidates away from their competitors.
With increased uncertainty and economic headwinds, the subsequent slump in the IT job market has had a marginal balancing effect
In such a scenario, companies had to compete to attract and retain the best talent, and this led to a very candidate-driven market giving job seekers greater bargaining power and the ability to be more selective about the opportunities they pursue. The short supply of talent and wage wars also had a significant impact on the job market, especially for companies that were struggling to fill critical positions. It also led to inflationary pressures as companies raised their prices to cover the higher costs of labor. However, in the long run, it can lead to unsustainable wage inflation and a mismatch between the skills required by companies and those possessed by the workforce.
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However, with increased uncertainty and economic headwinds, the subsequent slump in the IT job market has had a marginal balancing effect. To tackle these challenges, IT companies have now adopted a more strategic approach to talent management, focusing on identifying and developing the skills they need rather than relying solely on the labor market.
They will also need to invest in training and development programs to upskill their existing employees and attract new talent with a more comprehensive benefits package that includes non-monetary incentives such as flexible work arrangements, career development opportunities, and a supportive work environment.
While the domestic market sentiment remains robust, if further downgrades and mass layoffs are on the anvil, we will not remain insulated for much longer
In Q1 23 we witnessed a marginal uptick in hiring sentiment compared to Q4’2022 to the tune of 5%. The current quarter also remains muted, compounded by the recent news of the IMF downgrading the economy across the globe and we need to wait and watch how it unfolds.
The year ahead will pan out depending on how the Western world reacts and how the overall landscape shapes. While the domestic market sentiment remains robust, if further downgrades and mass layoffs are on the anvil, we will not remain insulated for much longer. This will have a negative impact on India as well, and compounded with surmounting attrition levels, hiring sentiment will dip further below the current 20% levels.
In my view, it is not doomsday but still not a very healthy place to be. Both Indian conglomerates and multinationals are traditional non-IT firms that are now hiring IT talent. Having said that, this will only be in the range of 5-10% of the overall IT demand in the market. But the downside is that most resources will be linked to the support IT companies provide for global projects.
Overall, while tech layoffs may occur, companies that prioritize innovation, diversity, and employee well-being are more likely to weather economic storms and emerge stronger in the long term
The increasing attrition rates in tech startups, particularly in unicorns and soonicorns, can also be a cause for concern as high attrition rates can lead to increased costs, decreased productivity, and a loss of institutional knowledge. The rise in global disinvestments in the tech sectors may have led to increased uncertainty and instability in the job market, causing employees to seek more secure job opportunities.
Additionally, the fast-paced nature of the startup industry and the pressure to deliver results quickly can also contribute to employee burnout and turnover. To address this issue, tech startups may need to focus on creating a positive work culture, offering competitive compensation and benefits packages, providing opportunities for professional growth and development, and improving communication and feedback channels between management and employees.
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The APAC market is much healthier, and India is for sure pretty resilient. But overall, the 2023 growth is expected to be very muted compared to 2022 at least in the first two quarters, and then may see a slow revival which will only show up in 2024. The skills are also becoming more complex, and customers are trying to look for more in the same person to save costs.
Overall, while tech layoffs may occur, companies that prioritize innovation, diversity, and employee well-being are more likely to weather economic storms and emerge stronger in the long term. The IT industry has been relatively resilient in the face of economic downturns in the past, and there is accelerated adoption of new-age technology, creating new opportunities.
To mitigate the risk of layoffs, tech companies can focus on diversifying their revenue streams, investing in research and development to stay ahead of the competition, and fostering a culture of innovation and creativity to identify new growth opportunities. Additionally, companies can invest in reskilling and upskilling their employees to prepare them for new roles and industries and prioritize employee retention to maintain a skilled and motivated workforce.
Guest contributor Ramesh Alluri Reddy is the Director – Managed Services & Professional Staffing of Adecco India, a global workforce provider that delivers fully integrated workforce solutions and will support an organization’s development and strategy. Any opinions expressed in this article are strictly that of the author.
