AI Impact on India’s Tech Hiring Dynamics

AI is significantly altering India’s tech hiring landscape, causing the anticipated job security for the country’s 1.5 million engineering graduates to dwindle rapidly. Major companies like TCS, HCLTech, and Cognizant are growing without the need for a larger workforce, indicating that the era of mass recruitment in the tech sector may have come to an end.

India’s IT Industry Shift

For many years, India’s $283 billion IT sector thrived on a straightforward principle: more clients led to more projects and subsequently more jobs. However, artificial intelligence is changing this dynamic—transforming linear progression into a model of stringent efficiency.

Industry Insights

S. Ravi Kumar, the CEO of Cognizant, stated in a recent earnings call that AI is redefining this formula by reducing time, cost, and complexity. His observations resonate throughout the industry as functions in coding, customer service, and application management increasingly face the threat of automation.

Adapting to New Realities

HCLTech was among the first to recognise this transformation. C. Vijayakumar, the CEO, mentioned in October that while revenue grew by 4-5%, their workforce did not see similar expansion. He confirmed that enhancing productivity is now crucial for growth. Revenue per employee has even increased by nearly 2% year-on-year, signalling gains driven by AI.

Job Losses and Modest Hiring

TCS, identified as the largest private employer in India, eliminated 19,755 jobs in a single quarter, marking the most significant reduction among leading tech firms. While Cognizant added 6,000 employees and HCLTech onboarded 3,489, these figures are modest when compared to the more aggressive hiring trends witnessed in previous years.

Productivity Gains and Industry Change

Analysts at Motilal Oswal emphasised the trend, indicating that revenue is climbing at a faster pace than headcount, showcasing productivity gains facilitated by AI. For example, HCLTech boasts earnings of $61,388 per employee—substantially higher than its competitors.

New Business Models

This transformation is not solely about numbers; it also influences how companies operate financially. TCS COO Aarthi Subramanian noted that clients are leaning towards outcome-based contracts, where billing is based on results rather than manpower. This shift translates to a decreased need for engineers while maintaining revenue levels.

The End of Traditional Growth Models

Phil Fersht, CEO of HFS Research, articulated this change succinctly, declaring that the period of direct proportionality between the number of employees and revenue has concluded.

Challenges for Graduates

For engineering graduates in India, this signifies a reduction in entry-level positions along with heightened competition. Educational institutions are hastily modifying their curricula to include AI certifications, although the opportunity to adapt may be closing rapidly.