17 Sept 2024
FY24 saw a rapid decline in subcontracting shares of several IT giants, hitting the lowest figures in almost eight years.
The Indian IT industry has relied on subcontracting, especially during the pandemic, to meet hiring needs and close in-house skill gaps. Often, these companies need subcontracting to meet the client's requirements on time.
This practice gradually increased the costs of subcontracting talent from third-party agencies, which hiked further in the past 18 months, mainly due to high attrition. The declining margins and slowing industrial growth pushed IT companies away from subcontracting to lower their costs.
TCS recorded subcontracting costs at 4% of its total revenue in Q1 FY25, the lowest since FY16. Wipro logged it at 11.3% in the same period, again the lowest since FY16. Tech Mahindra’s costs were 12.6%, the lowest since FY19, and Infosys recorded 8.1% last financial year, the lowest since FY21.
They are also focusing on strengthening in-house skillsets to optimise cost efficiency, better utilisation of billable hours, and control administrative expenses to boost margins.