Subcontracting costs soar 60% for leading Indian IT firms
MUMBAI, INDIA — India’s top four IT firms — Tata Consultancy Services (TCS), Infosys, Wipro, and HCLTech — are facing a significant increase in subcontracting costs, which have escalated nearly 60% in the past two years, according to data from staffing firm Xpheno. The rise has been attributed to a surge in digital demands and higher staff attrition rates post-pandemic.
subcontracting costs reached Rs 62,939 crore ($7.6 billion) by the end of March 2023, a significant leap from Rs 39,368 crore ($4.8 billion) in fiscal 2021. This surge resulted from the growing demand for subcontractors to fulfill immediate staffing needs and ensure project delivery.
“The billion-dollar-plus spent on subcontracting at large IT firms and the rapid rise of it post-pandemic has accentuated the decade-old practices of staffing procurement,” Kamal Karanth, cofounder of Xpheno, said on the issue.
Industry insiders estimate subcontractors constitute 10-15% of an IT firm’s workforce. Recent financial reports revealed TCS’s fees to external consultants rose 61.5% to Rs 21,337 crore in two years, while the cost of technical subcontractors for Infosys almost doubled to Rs 14,062 crore. Wipro’s and HCLTech’s subcontracting costs rose by 38% to Rs 11,524.7 crore and 47% to Rs 14,950 crore, respectively.
“An IT company typically has 80-120 staffing suppliers and each supplier is brought in based on unique skill specialisations they bring in, like cloud, cybersecurity or data analytics. However, this leads to an unmanageable long tail and the process is prone to vulnerability as the empanelment is based on relationships (rather) than capability in some cases,” added Karanth.
Aditya Mishra, CEO at CIEL HR Services, noted the rapid decisions required due to subcontracting’s direct revenue link.
“There are too few process checks and quality parameters in staff procurement and human resource management compared to delivery functions. This has always received lower priority and has come to light due to the recent events,” he said.
