India’s top three Indian software technology service providers – Tata Consultancy Services (TCS), Infosys and HCLTech- have focused aggressively on cost-cutting during the July-September period, which has been the quarter’s key highlight.
The outlook of Indian software giants remains uncertain as revenue growth has slowed. Therefore, the focus has shifted to the margin front. All three companies have surpassed EBIT margin expectations for the quarter, witnessing a jump of more than 100 basis points each.
Rising utilisation rates, increasing productivity, further cutting sub-contractor costs and reducing headcount are some of the other factors that contributed to the margin expansion of these companies during the quarter.
The total workforce base at Infosys declined by 7,530 and by 6,333 and 2,399 at TCS and HCLTech, respectively. This is the sixth consecutive quarter that IT hiring has been declining.
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To bring down the wage bills that ballooned following the excessive hiring during the COVID-19 pandemic, companies are looking to rationalise fresher intake this year. There has also been a delay in giving salary increments this fiscal — Infosys delayed it by nearly seven months, and Wipro by a quarter while HCLTech senior employees will not get hikes this year.
Infosys has an official project called ‘Project Maximus’ aimed at margin maximisation, which will run for another year and a half. The five-step programme includes value-based pricing, pyramid optimisation, higher efficiency through automation and GenAI, optimising challenged portfolios and optimising other costs.
Although Infosys has not divulged its margin target, its current margin guidance is 20-22%, which is lower than its previous guidance of 22-24%।
HCLTech, on the other hand, has stated that it is “laser-focused” on getting margins back in the 19–20 per cent range, according to its current guidance of 18–19 per cent.
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