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Indian IT firms are planning to reduce the dependency of subcontractors to control costs

As the COVID-19 is causing problems with revenue and margins fo the firms, Indian IT firms like Infosys, Wipro, TCS, MindTree are looking to reduce their dependency on the subcontractors to control the costs. According to a statement, these companies said that the subcontractors’ cost might reduce in the upcoming months. As of now, around 10-15% of total employee costs will be the value of a subcontractor.

Over the last few years, the subcontractors’ cost has increased due to the fact that companies are preferring to look elsewhere to hire people instead of looking at the inhouse talent they have.

Mr. Milink Lakkad, the Global Head at TCS has said they are looking to reduce these subcontractors’ costs in order to keep the costs under control. He also added that they will continue to build the talent from within the organization and lateral hiring will be done in a limited manner.

Last year, 13% of employee cost is the value of subcontractors at TCS. At Wipro, it is 22%, while at Infosys it is 12%. The subcontractor’s value at MindTree is at 11% of total employee cost.

The Chief Human Resources head at Wipro has said that they are evaluating all the supply chain of employees which also includes hiring, subcontractors, bench. He also said that there are multiple contractors working with them and it is going to cost them. Hence they are looking to replace them with their own pool of employees.

Infosys CFO also addressed the same in cutting subcontractors’ cost to optimize the overall costs. MindTree is also looking to follow the same. These companies are cutting the subcontractor’s cost in multiple ways. One way is to reduce the number of contractors associated with them, other way is to ask the contractors to take rate cuts and the final way is to ask the contractors to take deferred payments.

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