Indian IT firms are spending more than ever on external subcontractors

Onsite wages are on an all-time high, visas are being rejecting like never before, and the political environment in the US is something nobody would be unaware of; all these situations combined have forced India's IT firms including Infosys, Wipro and TCS to depend on external subcontractors more than ever before, for their outsourcing requirements.

The financial reports of financial year 2015-16 show that these tech giants spent more amount on parcelling off customer projects to smaller vendors as compared to earlier years. Moreover, most of the subcontracting work for these companies took place onsite in the US, which resulted in higher expenses.

Figuratively, the last FY saw TCS spending Rs 7,823 crore on external consultants' fees, as compared with Rs 6,116 crore the year before that.

Talking of Infosys, it spent Rs 4,417 crore on technical subcontractors in FY 16, as compared to Rs 2,909 crore in the previous year.

Wipro, similarly, spent up to Rs 6,486 crore on subcontracting expenses, as compared to last FY’s Rs 5,208 crore.

"What is happening is that subcontracting expenses for IT firms are going up, largely due to factors such as onsite reduction due to attrition and a shortage of skills. So these companies have no choice but to rely more on subcontractors, even though they are talking of gradually phasing out the reliance on subcontractors," an analyst at a multinational brokerage firm told ET on the condition of anonymity.


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