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SaaS firms freeze or cut down hiring as US recession looms

Companies are hiring judiciously as they worry about the impact of the US slowdown on business. HR experts say SaaS firms should use the opportunity to make business processes more efficient.

October 04, 2022 / 11:03 AM IST
Imagee Credits: Built In

Imagee Credits: Built In


Indian software-as-a-service (SaaS) companies have frozen hiring or are recruiting judiciously as recession looms over the key US market and investors and HR experts put pressure to cut costs.

"We are not hiring aggressively with the US Fed's stand and a fear of global recession. Not just SaaS but all companies are staying very cautious," said Girish Mathrubootham, chief executive and founder of Freshworks, in an earlier interaction with Moneycontrol.

“But we continue to hire in our go-to-market and with the macroeconomic conditions we want to also be more conservative in hiring,” Mathrubootham said.

Russia-Ukraine war, a massive hit on the supply chains, runaway inflation and Fed’s aggressive interest rate hikes may lead to a recession in the US. Experts are also concerned about the US recession spilling across the globe.

Business slowdown

Mathrubootham said that his company witnessed an impact on its businesses in Europe, especially in its small and medium business clients.

“We saw some impact in the SMB segment in Europe and there is an elevated churn. We are in the macro environment where many companies are optimising costs, freezing hirings and that will have an impact on expansion revenue,” he added.

Most SaaS companies, including Freshworks, Zoho, Icertis and CleverTap, are based in India but have around 70-80 per cent of their businesses in the US and Europe.

Coimbatore-based SaaS firm Kovai.co has frozen hiring and is on a wait-and-watch mode.

“We recently shifted to an office with a capacity of 300 people and around 240 people now. Our focus has now shifted towards building our product and investing in the business. We have decided to go slow on hirings and will do it only if it is absolutely essential,” said Kovai.co’s founder and chief executive Saravana Kumar.

Icertis which is valued at around $2.8 billion and a global leader in a $30 billion contract lifecycle management market, is staying cautious and working on improving efficiency.

Cutting costs

“There is definitely more focus on how we can be more efficient as a company not just by cutting costs but adopting and correcting several systems and processes that we had been following. However, in our business revenue depends on the quality product we build and not just with increase or decrease in workforce," said Monish Darda, co-founder, and chief technology officer of Icertis.

SaaS firm Exotel’s co-founder Shivakumar Ganesan said the company is taking cost-cutting measures as the new recruits are offered a 10 per cent lesser salary than what was offered earlier.

“Good experienced talent is always in short supply, with many new startups coming in India, there is an increase in demand. However, we have taken a longer-term approach by training freshers,” said Freshworks's Mathrubootham.

Talent crunch

However, firms also say that even as they are optimising hiring, there is a short supply of talent for the niche SaaS segments including DevOps, B2B marketing and CLM expertise.

As per TeamLease’s latest quarterly Employment Outlook Report, the IT sector scores 98 per cent on the “Intent to Hire’ metric, which is the highest among all industries. India is projected to face a shortage of 14-19 lakh tech professionals by 2026.

Engineers are available but for niche expertise like marketing, sales, or customer success India doesn't have the right talent at scale and B2B side of

SaaS is very different from the B2C side, said Prasanna Krishnamoorthy, co-founder of SaaS accelerator and early-stage fund Upekkha.

“Product selling and marketing are very different from service selling. Companies should work on diversifying and training their talent for long-term sustenance,” Krishnamoorthy added.

While the number of skilled talent entering the workforce is dipping, the existing pool of young engineers and developers are increasingly looking for flexible working options, higher compensation and better benefits, said Anand Jain, co-founder and chief product officer at CleverTap.

“These are some of the major reasons why some companies in the SaaS and overall startup ecosystem saw higher attrition,” he added.

The HR view

 

SaaS firms keep caution on hiring (1)
HR experts feel that SaaS companies should tap into the opportunities the looming global recession poses and work on optimising their solutions.

“When a recession hits, businesses tend to optimise their non-essential expenditure first and optimise their hirings to align with the larger goals,” said Sumit Sabharwal, CEO TeamLease HRtech.

This is the time when SaaS companies leverage their technology prowess to make business processes automated and more efficient, which becomes even more important in such scenarios, he added.

“For instance, HR tech platforms can improve administrative efficiency by over 20 percent, save time and cost by 30 percent and reduce errors and duplications by over 60 percent. Such solutions equip businesses to enhance productivity and throughput to cope with a recession,” he said.

So if an extended global slowdown is expected its impact will depend on the kind of SaaS product and solution the company offers, Sabharwal added.

 
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Bhavya Dilipkumar
first published: Sep 30, 2022 01:22 pm