In IT IndustryBench strength refers to full-time employees who are not assigned to an active project. IT companies typically keep employees in reserve between projects and deploy them as needed based on client demand. New recruits and people undergoing training are also often kept on the 'bench' until they start working on new projects.
“Large IT services companies typically bench 20-30% of their workforce. This has come down significantly, with many companies now reporting bench sizes of around 10%,” Krishan Vij, business head, TeamLease Digital, told ET. Vij attributes this shift to the increased emphasis on staffing. Skill Upgradation and redeploying bench staff.
IT Bench Strength
XphenoA recruitment firm, reports that the calibration of benches in major IT companies has picked up since the beginning of FY25 (April 2023). The fiscal year ended with an estimated bench size of 170,000, lower than the peak of 212,000 recorded in JFM2023 (January, February, March last year).
Sundar Eswar, IT Staffing Business Head, Xpheno, says, “As headwinds persist, margin pressures remained high till FY24 and this saw enterprises tighten their benches to control costs.”
Ishwar said reduction in bench size by 10,000 per annum could alone reduce manpower cost by Rs 400-450 crore, which would lead to significant improvement in the end result.
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SIAL HR Services reported that the IT industry has reduced its bench strength by 10 per cent in the last two years, resulting in a 50-75% reduction in the bench. “IT companies have been under pressure on profitability in the last few quarters given the global headwinds in the environment. In addition, new technologies such as Gen AI and cloud are disrupting every sector of the economy, including IT,” said Aditya Narayan Mishra, MD and CEO, SIAL HR Services.
India's IT outsourcing sector has seen a significant reduction in headcount, with the top six companies cutting over 70,000 jobs in FY24. As global companies faced economic difficulties and demand for technology slowed, IT services firms struggled to maintain revenue growth. This led to larger bench sizes due to less need for staff on projects, which impacted profitability. To remain competitive, IT giants focused on improving margins by maximising employee productivity, reducing headcount and efficiently allocating projects to underutilised benches.
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“Furthermore, excessive hiring during the pandemic contributed to a large bench pool, necessitating a shift towards leaner operations. Undoubtedly, the traditional model is moving towards strategic talent deployment in IT firms,” Vij added.
Utilization rates at major IT companies, or the percentage of employees actively engaged in projects, rose to nearly 80%, close to peak levels.
Without giving any exact figures, TCS He said it will continue to adjust its lateral hiring and focus on utilising the capacity built over the years. InfosysA smaller competitor reported a utilisation rate of 80.7% for the full year and 82% for the fourth quarter, still below its desired level of 84-85%. Major IT companies, including TCS, Infosys and Wipro, are also slowing down their campus recruitment efforts.
Companies are focusing on skill-based allocation, upskilling, and leveraging the gig economy to create a flexible talent pool that includes full-time employees, gig workers, and contractors.
Ramkumar Ramamurthy, partner at growth consulting firm Catalynx, looks at bench size based on revenue growth, speed of fulfillment, and range of services, industries and geographies.
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“The higher the growth, the higher the bench. The higher the interchangeability of resources, the higher the speed of fulfillment. And the wider the range of services and industries, the higher the bench. One of the reasons we have seen higher utilization in recent years is that there have been a number of large, cost-reducing deals by companies. In such deals, there will always be greater control and interchangeability of resources with minimal client intervention.”
Although Ramamurthi believes it is still early stages, AI is fundamentally changing the way software is developed, tested and deployed.