The AI impact: Rethink, rework, reboot

Time of India

29-04-2025

Executives say the traditional relationship between headcount and revenue growth will no longer be linear as AI boosts employee productivity. AI is nudging the largest IT companies as well as the engineers, to go back to the drawing board and rethink skills and strategy. Prachi Verma, Himanshi Lohchab & Annapurna Roy decode
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
The rapid ascent of artificial intelligence and automation is reshaping India's technology hiring landscape, with entry-level workers getting impacted the most. As AI takes over basic testing, coding, and web development tasks, engineering graduates may no longer be the bulk pick for IT firms. Instead, some Tier-3 colleges are noting enhanced selective recruitment with added rounds of screening and assessments during placements. The bottom layer of the hiring pyramid is shrinking with IT companies reporting lowest-ever fresh hires, as they sharpen focus on tapping skilled mid-level AI/ML talent.Executives say the traditional relationship between headcount and revenue growth will no longer be linear as AI boosts employee productivity. The scenario is further compounded by an accelerated talent drain towards global capability centres (GCCs) which offer lucrative salaries and perks.Some experts believe that as AI automation and sophistication grows, fewer people may be needed for entry-level tasks. IT services firms hired between 60,000 and 70,000 freshers in FY24—the lowest intake in two decades—according to reports.Between FY20 and FY25, while revenues at seven large-cap and 10 mid-cap IT firms collectively surged by around 60%, their headcount expanded by 33%, showed data shared by specialist staffing firm Xpheno. At the same time, for every rupee spent on employees, companies were generating `1.77 in revenue in 2020, which climbed onlymarginally to `1.82 in 2025, the data showed.This means that productivity shifts are not visible evidently yet, though this may change soon. C Vijayakumar, MD undefined what we saw in the last 30 years is a fairly linear scaling…. we have been challenging our teams on how you can deliver twice the revenue with half the people,' he said. 'As AI takes up more rule-based entry-level work, it would be wise to assume that the diamond structure will only get further sharper,' noted Kamal Karanth, cofounder at Xpheno. 'The new talent distribution structure does and will have a big-fat-middle layer.'Educational institutions are also experiencing a transition in campus placements, especially among IT firms who are more 'cautious' and rigorous with their hiring processes. 'Campuses are witnessing delayed offer rollouts, reduced intake and a growing emphasis on pre-placement internships/skill assessments as filters,' said Manoj Kumar Pandey, director at Amity School of Engineering & Technology. 'The demand for entry-level roles is declining. Instead of bulk hiring, firms are now opting for selective recruitment, targeting people with niche skills,' said Pandey.India's largest IT company TCS highlighted that 40% of its new hires are trained in advanced technologies—up from 17% last year. And half of lateral hires possess digital or Gen AI experience, the Tata Group company said in an analysts' call earlier this month. On their part, students are also beefing up the resumes to fetch higher salary packages. They are contributing to open-source projects, building AI models, and publishing GitHub repositories. 'Companies are expecting the students to help fields to handle AI tools. However, programming skills are still a must have. AI skills are considered essay flair on the basic skills,' said Ebin M Manuel, placement officer, Rajiv Gandhi Institute of Technology, in Kottayam, Kerala.Amity's Pandey said earlier, solving a few coding questions could have been considered sufficient for entry-level hires. However, companies are currently focusing on system design during technical rounds, which was not the norm previously. Recruiters are adding real-time debugging or whiteboard sessions. 'Many organisations are introducing complex tests,' said Maya Nair, ED, Elixir Consulting at global talent firm GI Group Holding. 'Emphasis is being given to demonstrating problem-solving skills and critical thinking.' But others believe hiring at lower levels will continue unabated to manage costs as margins are under pressure.The unfolding scenario is compounded by a rising skill gap. 'The rapid growth of GCCs has resulted in a talent drain from traditional IT firms, particularly in Tier-1 cities. There's a shortage of 200,000 skilled professionals in areas like AI, cloud, and cybersecurity,' said Krishna Vij, VP at TeamLease Digital. Staffing firm Quess says emerging tech roles are being offered 30-50% higher salaries in GCCs than in IT services companies, with entry-level roles offering up to `11.8 lakh annually. 'As the GCC workforce in India is projected to reach 2.5 million by 2030, IT firms must evolve from being service providers to strategic talent destinations,' said Kapil Joshi, CEO at Quess IT Staffing.