GCCs driving demand, hiring by IT services still muted: Quess Corp

Quess Corp CEO Guruprasad Srinivasan.

Hiring by information technology (IT) services firms remains low but demand for talent is coming in from Global Capability Centres (GCCs) and product and engineering companies, staffing firm Quess Corp has said.

In an interview to Moneycontrol after the announcement of Quess’ Q3 earnings, CEO Guruprasad Srinivasan said the hiring demand from traditional IT companies has fallen by 16 percent year-on-year.

"We work with about 125 GCCs across, is where our demand is coming from plus the product and engineering companies," he told Moneycontrol.

A global capability centre is a centralised unit within a company that handles various functions such as IT, finance or customer support on a global scale to improve efficiency and streamline operations.

“So, in a way Q4 also I think will be muted,” Srinivasan said but added that the demand in the third quarter of a financial year is tepid because of furloughs.

The IT staffing margin is usually higher for staffing companies when compared to general staffing. Srinivasan said margins have been steady, as Quess recruits mid-to-senior level positions and the company can realise better bottom-line margins because the average wage is Rs 60,000 and above.

“It (margins from IT staffing) has not declined but it has not grown for us,” he said.

Quess Q3 earnings

Quess’ December quarter net profit declined 24.7 percent to Rs 64 crore from a year earlier, while revenue grew 8 percent to Rs 4,842 crore, the company said on February 2. The total associate headcount reached 5,57,000 from 504,000 in the previous quarter.

“The biggest impact (on revenue growth) is our IT, which is also a big contributor to the workforce segment in terms of wage and has really not taken off well. IT services have still not opened up at all,” said Srinivasan.

He added that the year-on-year decline in PAT is mainly due to the absence of significant gains from a divestment made in the previous year.

In addition, the company went through the National Company Law Tribunal (NCLT) process to merge three companies, resulting in tax implications and non-cash goodwill impact, particularly for the larger entity Quest absorbing the smaller entities, among other impacts, he said.

The company implemented the amalgamation of its fully owned subsidiaries Conneqt Business Solutions Limited, MFX Infotech Private Limited and Greenpiece Landscape India Private Limited after getting NCLT approval.

Campus hiring freeze 

Srinivasan also said that the freeze on campus hiring by IT companies is a mistake, which is likely to hurt the workforce in the coming one to two years.

This comes at a time when the slowdown in campus hiring in the information technology and IT-enabled services sector has impacted legacy tech schools across the country.

“Can we survive without freshers coming into our workforce? Absolutely not. It has to happen. This is another mistake that is actually happening. With the lack of a large enough talent pool, and the cost of acquisition of existing people going up, this (slowdown in fresher hiring) will get amended and there will be more consumption happening from campuses as we move into March and April, otherwise, it's going to be a problem,” Srinivasan said.

India’s top five IT services companies, which have employed thousands as mass hirers, have been muted on fresher hiring this quarter.

Infosys, India’s second-largest IT services company, said it sees no immediate campus requirement as of now. Wipro and Tech Mahindra have not said anything on the matter.

India's biggest IT player Tata Consultancy Services (TCS) said it has commenced its campus hiring process for FY2024-25 and HCL said it hired 3,000 freshers in the third quarter.

For inducting new talent, companies should spend on training which many seem apprehensive about lately, Srinivasan said.

“You can't bring people from campus to corporate directly; they need to undergo a lot of training. However, companies are a bit fearful about hiring somebody new, investing in them, having an escalated cost and then it taking at least six months for them to take on newer technologies which are in demand. But it's a chicken or egg story. So you will have to have this happen and it will come back,” he said.