After losing talent to startups that had offered fat pay cheques to employees of IT service providers such as Tata Consultancy Services (TCS), Infosys, Wipro and HCL, now the trend has been reversed as the startup world is rocked by mass layoffs and a funding winter.
The startup world’s loss is IT’s gain. People are giving up on their startup dreams and coming back to a stable work environment.
After losing talent to startups that had offered fat pay cheques to employees of IT service providers such as Tata Consultancy Services (TCS), Infosys, Wipro and HCL, now the trend has been reversed as the startup world is rocked by mass layoffs and a funding winter.
According to data shared by talent consulting company Han Digital, around 40-50% of employees leaving startups are getting absorbed by IT companies, consulting and product companies and global captive centers (GCCs).
Over the last few months, Indian tech startups, including a few unicorns such as Cars24, Vedantu, Mfine and Meesho – to name a few – have fired nearly 6,000 people as they scramble to cut cash burn and extend their runway, according to market estimates.
Of the people getting reabsorbed by the traditional, non-startup ecosystem, nearly half have joined product companies, while a fourth enter GCCs, said Saran Balasundaram, founder and CEO of Han Digital.
The Indian IT sector has reported record attrition in the previous quarter, with TCS’ rate at 17.4%, Infosys at 27.7%, HCL Technologies at 21.9%, Wipro at 23.8% and Tech Mahindra at 24%.
They have, however, all reported some stability in quarterly attrition with better compensation and hikes, improved hiring and work-life balance measures.
“From 2020 onwards, there have been numerous unicorns and pre-IPO startups hiring big. Hence, there has been a constant surge in the startup hiring demands. However, layoffs across some of these companies have triggered negative sentiment among job seekers,” said Balasundaram.
Roles for full-stack engineers, data engineering, product management, and DevOps are in demand across IT companies, GCCs and Software as a Service (SaaS) startups, he said.
India’s overall IT-BPM headcount currently stands at about 5.1 million, of which around 420,000 are employed with startups.
Almost 20% of this workforce left startups to voluntarily join the IT-BPM ecosystem over the past year, he added.
A 31-year-old startup employee, who did not wish to be named, told ET that he had switched from a job at a leading consultancy to a bootstrapped startup in January 2020.
Though he had joined with a fat hike and the promise of a dynamic role, he soon regretted his decision as funds dried up and the startup struggled to pay employees after the Covid-19 pandemic.
“In March 2021, I started looking elsewhere for jobs. While the initial months were difficult, by June I had multiple job offers and soon joined one of the Big Four (consulting firms). In fact, two other employees from the startup team joined the same organisation while at least three others have switched to core IT companies in their old profiles,” he added.
A lack of clear direction was the biggest drawback at his startup role, he said.
While an unstructured organization was a prime attraction prior to the pandemic, the same became a worrying factor because the founders could not foster confidence in the employee base about the future of the organisation.
“I felt it was safer to move to a stable organization even if I took a pay cut. At least, I knew when to expect my next pay cheque,” he said.
IT and product companies across the world as also wooing people back from startups.
“We continue to explore and add talent from startups. Startups are great ideas but it does not mean they have the ability to create fool-proof business models,” said Raj Vattikuti, founder and chairman of US-based digital transformation company Altimetrik Corp.
GCCs, the Big Four consulting firms and product companies are also gaining from this return.
“The layoffs are a correction that follows a hyperactive hiring phase among startups. Few of the funded tech startups and IPO aspirant companies utilized the overall buoyancy in 2021 to create excess capacity to cater to demand growth,” said Anil Ethanur, co-founder of Xpheno, a specialised staffing firm.
“A perceived return to normalcy a few quarters from now, has calibrated funding pipelines and business projections. Headcount corrections are in line with the overall sectoral and enterprise moderation that is in play… The layoffs have added more talent into the active pipeline accessed by the different cohorts,” Ethanur told ET.
(Source: economictimes.indiatimes.com)