Infosys, the information technology (IT) major, has decided to not to push upward its staff utilisation for now.
The country's second largest IT services company is looking at building the ‘bench’ of employees in reserve, to be prepared for emerging demands, beside keeping staff attrition in control.
From a peak of around 86 per cent at the beginning of the financial year (April 1, 2018) the Bengaluru-headquartered firm is looking at a utilisation rate of 83-85 per cent. In the past couple of years, with increasing pricing pressure and competition, almost all Indian IT service companies
have pushed employee utilisation; some were focusing on a ‘just in time’ hiring model. Though this had benefited the profit margin, it put a lot of pressure on the supply base, as the bench (number of employees in reserve, not assigned any project work) had been reduced to near-zero.
"If you look 18 months back, our utilisation was always 78-80 per cent. Since then, it has gone up but we felt that this was not sustainable and we want this to remain at a band of 83-85 per cent,” said U B Pravin Rao, chief operating officer at Infosys.
“That gives us enough flexibility to capture the demand."
Infosys’ employee utilisation rate, like many others in the sector, started picking up from the 80.5 per cent in the first quarter of 2016-17 to 83.8 per cent in the quarter ended December 2018. In April-June, the first quarter of the current financial year, it had touched an all-time high of 85.7 per cent.
Analysts said the fall in utilisation is linked to the higher employee addition seen in the past quarter. "Earlier, IT service companies
were not hiring, due to subdued demand. But, as they add more employees on the rolls, due to more numbers of contracts, the utilisation level will fall as they can't put people on projects overnight," explains Kris Lakshmikanth, chairman of personnel consultants Head Hunters India.
Adding: "Increased on-site hiring, especially in US, is also leading to a fall in utilisation levels, as companies
have to hold on to people there even without projects, due to shortage of STEM (science, technology, engineering, mathematics) talent.”
During the July-December period, Infosys
had added 15,596 people on a net basis. In comparison, the addition was 3,743 in all of 2017-18. And, raised localisation by hiring 7,500 employees in the US, including 2,000 campus hires in 18 months.
At the end of the September quarter, the utilisation at HCL Technologies was 86.7 per cent and 85.5 per cent at Wipro. Both are yet to announce the December quarter results. Tata Consultancy Services, the sector’s largest, stopped sharing this figure a few quarters earlier.
has also seen a higher attrition level, of more than 20 per cent over recent quarters. It was 23 per cent in the June quarter, falling to 22.2 per cent in the September one. In the just-concluded quarter, there was a further fall to 19.9 per cent. This, however, continues to be far higher than at TCS, which had 11.2 per cent in the December quarter.
"In a way, planned reduction in utilisation could be linked to the higher attrition level at Infosys for the past few quarters," said Pareekh Jain, founder of Pareekh Consulting.
Maintaining decent bench strength would, he added, help in implementing new projects. Infosys won $1.5 billion in large contracts in the December quarter and raised its revenue growth expectation for the entire financial year to 8.5-9 per cent, from the earlier one of six to eight per cent. Analysts believe all the major IT service firms would see a fall in utilisation levels in the December quarter, similar to Infosys, as hiring at all had increased in recent quarters.