Why IT companies are fine compromising margins to attract talent

As the war for talent rages across the technology industry, IT companies are turning to trusted subcontracting sources to fill the gap. According to estimates, subcontracting costs during the fiscal second quarter were up 7-10% from the previous quarter across the IT industry.
Even as companies have bumped up hiring, they are also making peace with surge pricing across subcontractors to make up for the heavy client demand they are processing said executives of IT firms. As in the case of hiring, even in subcontracting, employees with strong digital skills are the ones drawing premium payment.
During the Q2 earnings conference of Tata Consultancy Services, chief financial officer Samir Seksaria noted that talent supply-side shortages and increased employee churn had led to higher back-filling expenses and greater use of subcontractors across the industry. Infosys noted a margin headwind of 0.5% due to higher subcontracting costs which have been seen as a necessity in the current environment. While the higher cost puts pressure on margins, the impact on the bottom line is mostly offset by an increase in business for these companies.