{"id":1284113,"date":"2024-08-07T11:11:40","date_gmt":"2024-08-07T05:41:40","guid":{"rendered":"https:\/\/trak.in\/stories\/?p=1284113"},"modified":"2024-08-07T11:12:01","modified_gmt":"2024-08-07T05:42:01","slug":"tcs-hcl-wipro-saving-money-by-avoiding-costly-consultants","status":"publish","type":"post","link":"https:\/\/trak.in\/stories\/tcs-hcl-wipro-saving-money-by-avoiding-costly-consultants\/","title":{"rendered":"TCS, HCL, Wipro Saving Money By Avoiding Costly Consultants"},"content":{"rendered":"\n

India’s leading IT services companies, TCS, HCLTech, and Wipro, have significantly reduced their spending on temporary consultants, indicating a shift in the traditional outsourcing model. This change comes amidst subdued client spending and a move towards remote work handling, impacting the overall cost structure and profitability of these companies.<\/p>\n\n\n\n

\"TCS,<\/figure>\n\n\n\n

Decline in Subcontractor Expenses<\/h4>\n\n\n\n

The subcontractor expenses as a percentage of revenue for TCS, HCLTech, and Wipro have been declining quarter over quarter for the last two years, reaching their lowest since December 2019. TCS’s subcontractor costs dropped to 4% of its operational revenue of \u20b962,613 crore in the June quarter, the lowest since Q4 2019 when it was 7.9%. HCLTech’s expenses fell<\/a> to 12.6% from 14.8%, and Wipro’s to 11.3% from 14.7%.<\/p>\n\n\n\n

Strategic Shift and Cost Management<\/h4>\n\n\n\n

The reduction in subcontractor expenses is attributed to reduced discretionary spending by clients and a strategic shift towards handling more work remotely. This move is expected to help boost margins, although most top IT companies have yet to return to pre-pandemic profitability levels. TCS, for instance, has focused on growing its own talent and reducing contractor dependence to manage costs effectively.<\/p>\n\n\n\n

Infosys: The Outlier<\/h4>\n\n\n\n

Infosys, India’s second-largest IT services company, saw an increase in subcontractor expenses to 8.1% in the June quarter from 7.5% in Q4 2019. Despite this, Infosys has let go of many permanent employees over the past two years while winning several mega deals, necessitating the hiring of consultants for client projects.<\/p>\n\n\n\n

Impact on Operating Margins<\/h4>\n\n\n\n

Despite the efforts to manage costs, operating margins for these companies have declined. TCS\u2019s operating margin shrunk to 24.7% in the latest June quarter from 25% in Q4 2019. Infosys’ margin dropped to 21.1% from 21.9%, HCLTech’s to 17.1% from 20.2%, and Wipro’s to 16.5% from 18.4%.<\/p>\n\n\n\n

Changing Client Requirements<\/h4>\n\n\n\n

The post-COVID shift towards remote work has made clients more open to offshore work, reducing the need for onsite subcontractors. As a result, IT companies have been replacing contractors with their own staff and moving more work to India or other offshore locations to reduce costs.<\/p>\n\n\n\n

Upskilling Workforce<\/h4>\n\n\n\n

IT services companies are also investing in upskilling their workforce to reduce dependence on expensive consultants. For instance, TCS increased its employee count to 606,998 in the latest June quarter from 446,675 in Q4 2019. Similarly, Infosys, HCLTech, and Wipro also saw significant employee count increases.<\/p>\n\n\n\n

Future Outlook<\/h4>\n\n\n\n

For now, subcontractor costs are expected to remain stable at current levels. TCS\u2019s CFO, Samir Seksaria, indicated that subcontractor costs have likely bottomed out or will remain stable, not serving as an incremental cost lever.<\/p>\n","protected":false},"excerpt":{"rendered":"

India’s leading IT services companies, TCS, HCLTech, and Wipro, have significantly reduced their spending on temporary consultants, indicating a shift in the traditional outsourcing model. This change comes amidst subdued client spending and a move towards remote work handling, impacting the overall cost structure and profitability of these companies. Decline in Subcontractor Expenses The subcontractor […]<\/p>\n","protected":false},"author":30,"featured_media":1284122,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[5811,347,92],"class_list":["post-1284113","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-consultants","tag-hcl","tag-tcs"],"acf":[],"yoast_head":"\nTCS, HCL, Wipro Saving Money By Avoiding Costly Consultants - Trak.in - Indian Business of Tech, Mobile & Startups<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/trak.in\/stories\/tcs-hcl-wipro-saving-money-by-avoiding-costly-consultants\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"TCS, HCL, Wipro Saving Money By Avoiding Costly Consultants - Trak.in - Indian Business of Tech, Mobile & Startups\" \/>\n<meta property=\"og:description\" content=\"India’s leading IT services companies, TCS, HCLTech, and Wipro, have significantly reduced their spending on temporary consultants, indicating a shift in the traditional outsourcing model. 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