Indian IT firms cutting bench sizes to boost revenue
What's the story
Leading Indian IT firms, including TCS, Infosys, Wipro, HCLTech, and Accenture have been trimming bench sizes over the last year.
This is to safeguard profit margins and improve utilization rates amid slow revenue growth.
Benching refers to employees who are not deployed on active projects. They remain as backup in case of a sudden client demand.
Industry experts and staffing companies say not only have bench sizes shrunk but also the time workers spend on the bench has reduced significantly.
Duration reduction
Shift in bench time duration and employee allocation
As per market intelligence company UnearthInsight, the average bench time has now come down to 35-45 days.
This is a notable decline from the previous average of 45-60 days witnessed in FY20 and FY21 when revenue growth was strong.
The trend is expected to continue into FY26 as firms focus on employees with niche skills in artificial intelligence, machine learning, and cloud computing.
Employee shift
Decline in benched employee percentage and skill demand
Benched employees, who once formed 10-15% of the average total headcount mix of IT companies, now only account for 2-5%, according to TeamLease Digital.
Kamal Karanth, co-founder of staffing firm Xpheno, attributes this to "the hyper-hiring in 2021 and early 2022," which led to lower utilization rates.
He adds that enterprises have since chosen a mix of staffing consumption for just-in-time workforce and sub-contract arrangements for longer tenures.
Competition rise
Increased competition and shift in hiring models
Krishna Vij, business head-IT staffing at TeamLease Digital notes that "from 70-75% utilization, companies have started reaching 80-85% utilization rates."
He also highlights a drop in attrition from 28-30% to 11-13%.
As Global Capability Centers (GCCs) start recruiting directly from the talent pool, IT firms are facing heightened competition.
In response to this challenge, they're adopting leaner and project-specific hiring models.
Model adaptation
IT firms adapt to market demands and AI disruption
Despite current utilization rates staying in the ideal mid to late 80% range for IT companies, estimated bench sizes have fallen by 15% from last year, according to Xpheno data.
Gaurav Vasu, founder and CEO of UnearthInsight says, "around 2-3 months is the current bench policy for laterals," but top-tier firms like TCS are looking at faster project deployment from the bench.