Reality of High Utilization | IT Layoffs 2024 - Will TCS Wipro Infosys FIRE Bench Employees?

hello everybody we are in 2024 and exactly 10 years back in 2014 the utilization rates of employees in infosis was 69.5% and in 2022 that number increased to 77% it took 8 to 9 years to increase the utilization numbers from 69% to 77% and guess what in less than 1 year from 2022 to 2023 that utilization number has increased from 77 to 81 % now just hold on why am I talking about utilization numbers and why did it change so on so forth these might be some of your questions but let me tell you that in the IT services industry utilization is one of the key metrics that is tracked for the companies and also at an individual employee level like you and me and this utilization metrics determines how much salary we are going to get how much appraisal are we going to receive what is the mental state that we are going to be in and do do we really get to learn something versus not so this is an important metric for us to understand and how it has evolved over time so let's start the video with understanding what is utilization metric what is this entire utilization rate imagine Karthik is working it enforces if he is working for 100 hours in every single month and if he's spending that entire 100 hours for a client and the client is paying Karthik the utilization is 100% however if Karthik is spending only 80 hours for the client and remaining 20 hours probably he's paying table tennis or he's just taking chai breaks or he's doing some internal organization work for infosis itself doesn't matter what it is the utilization is still only 80% because he is getting paid for that 80 hours only and this is very important to understand because for this 80 hours client is paying infosis for karthik's time and this is how infosis TCS Vio cognizant all the IT services companies make money and they want Karthik to work as much as possible for client so that they can make most amount of money on Karthik similarly if there are 5 lakh employees or six lakh employees at TCS they would ideally want everybody to work so that they make money on every single individual but if we go back in time 2013 the utilization rate was 70% that is either Karthik is working only 70% off his time on the client hours or overall of the 5 lakh employees only 70% of them are billing their time to the client why was this especially in the large organizations this was done so that if a new project comes up then they'll have more people on the bench and they can immediately allocate those free people to the new project and that's their buffer the other thing if for example Karthik himself leaves then they have another back fill from the bench that is the people who are not assigned to any projects and in big organizations the attrition rates were also very high now all these things were taken into account to determine that a utilization rate of around 70 to 75% is a good number then why did that number increase all of a sudden just to set the context it took 9 years for infosis from 2013 to 2022 to increase the utilization number from 69.5% to 77% 9 years for a 8% change but in less than 1 year from 2022 to 2023 end of 2023 in four quarters that number increased by almost 5 percentage points again to 81.5% why did it change so drastically to understand that let's go back into 2002 2009 when there was a financial crisis in 2009 and in 20012 2002 there was that impact of theom bubble every single time whenever there is a crisis situation the billel rates of the employees went down and articles very clearly have explained that from 2002 and 2009 as well so the money that infosis made on Karthik for example if they were making $40 when everything was good suddenly when recession has hit that $40 the client was not willing to pay the client said hey we'll pay only $20 or $30 so the money they were making on Karthik reduced suddenly so they have to make more kiks to work for the same amount of money hence the utilizations have increased whenever these recessions have happened so what recession has happened in 2022 and early 2023 well guys it's not the recession but the impact of gen aai when Gen AI came into the picture a lot of clients started realizing that rather than Outsourcing some manual and routine task they can make the AI get that work done so companies the IT services companies had no choice but to reduce their billing rates and when they reduce the billing rates of course they need more people to work and hence the utilization rates immediately shot up and if you are serious about getting into data science and AI do check out Odin school's instructor Le live 6-month boot camp in this boot camp you will learn from the basics of data science to the advanced AI topics under the expert guidance of Industry mentors this is not just about theoretical learning but you will actually do 10 plus industry projects if you go through the success story you will realize that a lot of folks used this boot camp experience to launch their career in data science or even transition into data science once you complete this six-month program you will be eligible to apply for their 500 plus hiring Partners the placement support will continue for 2 years where you will be having a lot of mock interview sessions behavioral sessions and so on go ahead and apply for the program using the link in the description box the boot camp is priced at 75,000 rupees but there are Emi options and and also early bird offers going on right now now there is also another side of the story it is not just that they are getting paid less from the clients now infosis and all the other IT services companies also had to pay more to their employees this article very clearly indicated that the overall appraisal the hike for managerial roles in IT services companies were around 27% in 2022 so the employees were also taking more money home hence the balance of the equation was not working in company's favor on one end they were getting paid less by the clients on the other end the employees were taking more so what is the option two things that these guys have done lay off that's the reason why we have seen Vio laying off employees and a lot of other companies resorting to the same technique layoff employees and also increase the utilization rate make more employees work both sides of the coin working in tandem now there is also another part of the story it is not just about gen aai if you look into who are the primary contributors who which clients give work to infosis or TCS or vipro you will realize that majority of the Indian IT services companies derive work or get their work from banking clients and what happened to banks in 2023 guys if you remember there was Silicon Valley Bank collapse and credit Swiss that went through a lot of trouble and a lot of banks internationally well reputed Banks had to go through the kind of recession periods for themselves and because of this it is not just reduction in Billing rates some of the banks have cut down their entire projects for these IT services companies so the billing rates did not come from 40 to 20 the billing rates came down to zero all of it sudden now you can imagine how many forces were acting together fortunately or unfortunately banking was the top client industry for almost all the IT services companies in India banking increased employee salary also client expenses coming down all these things together have been like hitting these IT services companies from all the different directions I have to say that hey this probably is one of the things that they did it for themselves now all these IT services companies are trying to diversify their customer base they want to reduce the amount of money they are getting from Banking and they trying to get clients from other Industries Why did they not do that previously because banking was paying them well but once they got that one jet car they want to now move and get more clients from other Industries now how does this impact you and me the first thing is when the utilization rates are low you have to work probably 70% of your time for the client and the remaining 30% as I said you might go ahead and play table tennis nobody really bothers also you can spend that time on learning doing some trainings or there are some mandatory trainings by the organizations themselves or you can contribute to organization level initiatives a lot of additional things on your profile that that you can build but if you are working 100% of your time or 100% of the employees are working towards these clients projects of course the emphasis on the overall growth goes down drastically well it services companies are all about making sure that the client is getting the right delivery always I agree with that but now that emphasis has increased even more because of these tough economic situations the second thing now that you are working a lot more for the client there is obviously a lot more stress that you are taking because you are working late night hours almost 50% of the revenues that Indian it companies derive come from the US and you have to work late night hours almost every single day from Monday till Friday well during the night hours you work like a fresher but during the day ARS if you are participating in any other organization level initiative you are working like a leader so you have no Clarity with respect to the role that you are taking because of these increased utilization rates now I hope hope this video gives you a good Clarity on one of the most important metrics in the IT services industry keep a track of your personal utilization rate as well and do keep those breaks handy if you have to go ahead take some break for yourself so that you are mentally much more calm please do take it share it with your friends and let's increase the awareness and the knowledge about the industry itself see you again in the next one guys bye-bye

Channel: Pavan Sathiraju

Views: 73,139

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Id: XH8SEnt7yO8

Length: 10min 25sec (625 seconds)

Published: Wed Feb 21 2024