Slowdown in IT Sector: A Warning Sign

- Impact of slowdown in global economies on demand for IT services

A warning sign is the slowdown in hiring in the information technology (IT) sector. There is ample evidence and data that there is a slowdown in this sector. In such a situation, there is a growing concern that the slowdown seen in the global economies will also affect the demand for IT services. This situation is likely to persist for at least the next few quarters. Many engineering colleges say that big IT companies have not come to the campus and recruited freshers this year. In such a situation, we can say that less youths will get jobs in this academic year and since these youths need many months of training, it can be assumed that the big IT service companies are anticipating such a slowdown.

Releasing the December quarter results, TCS has cut its workforce for the third quarter and for the first time in many quarters, certain to be creating an environment of weakness, particularly in the IT sector, a job-related portal said. Infosys hired only 1,600 employees in the same quarter.

There is also evidence to suggest that the number of IT workers looking to change jobs may outnumber the jobs available. There are other reasons that point in this direction. Very few new startups are starting now. Due to which the important source of employment in the IT sector is decreasing. There have been massive layoffs at technology giants like Facebook, Twitter and Google. Due to this thousands of experienced employees are in the market who have no alternative employment. Now such information is rarely found on websites where freelancers in the IT sector can find contractual employment.

Even big companies no longer complain about employees who work other hours than regular work. Leading IT companies have also signaled a slowdown after the latest results. Most large companies have some type of spending limit in place. This means that only those projects that will have an immediate positive impact on revenue or that will help control costs are being taken forward. For example, digitization efforts and demand for cloud and cyber security remain strong.

The IT industry is strongly linked to economic activity, which is also a major cause of potential recession. Most of the Indian IT industry's revenue comes from North America, with Europe being the second largest contributor by region. Currently all economic sectors are affected.

Macro trends show that Western Europe is still reeling from the aftermath of the Ukraine war, while the UK has yet to recover from the effects of Brexit. Japan and the US are battling inflation. China is coming out of a long lockdown. The trend shows that the employment crisis in the IT sector may increase. Talking about the macro-economic effect, the decline in earnings from service exports may put pressure on the country's external account.