India’s largest software service companies have been facing a double whammy due to high attrition as new-age tech startups attract some of India’s brightest minds behind the computers and the need to meet shareholder expectations.
This is both with respect to showing revenue growth as also pumping out more juice from the business with better margins and profits.
But with the key cost factor involving people, or in other words employees, the tech giants have to walk a tightrope. They need to balance the requirement to attract talent and, more importantly, retain them with the right compensation compared to what the startup world is offering.
At the same time, they need to maintain the cost structure and indeed improve it to meet shareholders’ concerns over margins.
We pick the top three IT companies by revenue—Tata Consultancy Services, Infosys and Wipro—and trace their recruitments over the last three to five years and the productivity generated by their human capital. We measured productivity via two metrics: revenue from operations and net profit.
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To be sure, it’s not a direct reflection of how much exactly each employee is producing as at any given point there are a number of employees on the bench as a reserve force.
In a related aspect, many people would have been hired at the fag end of the last quarter and they are likely still going through the induction process. Yet to contribute to the financial numbers.
That said, the trends indicate how the top tech behemoths have performed with respect to sweating, though not literally, in their workforce. And one can gauge how they compare to each other.
For starters, let’s see how the top three IT companies have gone about on a hiring spree. The companies have increased their global workforce by 50% on average over the last five years. They had over 1.1 million on their rolls as of March 31, 2022.
In the five-year period, they have increased its headcount by 3.86 lakh. Of this, nearly 2 lakh people—or more than half—were hired in the 12-month period ended March 2022.
Of the three, TCS has remained the biggest employer with a headcount that exceeds the aggregate number of Infoscians and Wiproites.
Revenue per employee
Things are a bit different when it comes to what these employees are generating for their company. Infosys has traditionally been generating more revenue per employee and continues to do so.
In fact, if we go by hard statistics, then Infosys has actually improved what an average employee is generating in terms of client billing. This need not be a reflection of the actual output per employee but also the quality and billing power of the companies from their customers and the category of clients and so on.
But for every rupee that a TCS employee generated in terms of revenue, an Infoscian did nearly 20% better in FY22. Last year was a breakout year as previously this gap hovered in the 5-15% range.
If we compare Infosys with Wipro, things are not different with one exception, Wipro’s employee productivity had dipped significantly in the first year of the pandemic. It slipped around 8%, while Infosys saw improvement in productivity during 2020-21.
TCS had also seen a marginal dip in employee productivity that year. In fact, it saw a drop last year, too. Both Infosys and Wipro saw an improvement last financial year, with the latter seeing a marked improvement. In the process, Wipro beat TCS in terms of revenue per employee after falling behind it for three straight years.
Profit per employee
But things are quite the opposite when it comes to profit per employee. To be sure, profit and thereby profit per employee is dependent more on financial management including treasury income and tax outgoes.
If we look at the numbers five years ago, for 2017-18, and juxtapose it with the numbers thrown up last financial year, or 2021-22, we see a decline in the metrics for TCS and Infosys while Wipro has recorded a much better number last year. Wipro came the closest to match its bigger rivals in the absolute terms in FY21, shrinking the gap from around 50% in FY18 to just about 11%.
This did get muted again last year with TCS marginally pushing its profit per employee while Infosys and more so Wipro seeing a slide in their numbers.
Infosys however saw a bit of a dampener if we look at it from a five-year perspective. Its profit per employee has declined from Rs 22.7 lakh in FY18 to Rs 18.2 lakh last year.
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Net-net, we see increased hiring by the tech giants all around as they grow their business. Infosys has seen a secular improvement in revenue per employee even as it has slipped in terms of average profit per employee in the same period.
TCS has seen better days in terms of revenue per employee and has seen it decline for the last two consecutive years after coming closest to matching Infosys. On the flip side, it has maintained a much better performance in terms of profit per employee, having outscored Infosys for the last four years running after trailing it in FY18.
Wipro has had a mixed picture, improving its average profit per employee a tad even as its revenue per employee has declined in the same period.