New-age companies that have relied on tech to drive disruption are now opting out of hiring replacements for the once-prized chief technology officer (CTO) role after the position becomes vacant, in a bid to cut costs during the ongoing funding downturn.
New-age companies that have relied on tech to drive disruption are now opting out of hiring replacements for the once-prized chief technology officer (CTO) role after the position becomes vacant, in a bid to cut costs during the ongoing funding downturn.
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Zomato, Swiggy, Byju’s, Ola Mobility, BookMyShow and Udaan, are among the startups that have re-evaluated the CTO position by hiring internally, redistributing an outgoing CTO’s responsibilities to senior leaders, or even leaving the position vacant in some cases, according to research by Longhouse Consulting.
After tech leaders like Zomato’s Gunjan Patidar, Leadsquared’s Sudhakar Gorti, Healthify’s Sachin Shenoy, Apna’s Shantanu Preetam, and Udaan’s Gaurav Bhalotia, left their respective companies, their responsibilities were redistributed among other lower ranked leaders in the hierarchy instead of the companies looking for a replacement to fill the position.
Some firms, like Swiggy, Byju’s, Yubi and Curefit, among others, even chose to elevate an internal executive to this position instead, when their CTOs Dale Vaz, Anil Goel, Harsh Mittal and Shamik Sharma, called it quits from the respective firms.
Practo, BookMyShow and Vedantu, meanwhile, did not announce the appointment of a replacement after their CTOs left, the Longhouse report noted.
A well-considered plan
“Startups are facing significant cost pressures, and promoting internal talent saves costs. These alternatives of external hiring are also helping maintain focus, and avoiding disruptions during the downturn,” Anshuman Das, CEO of Careernet and Longhouse Consulting, told Mint.
In fact, companies that are retaining their high-cost CTOs are pushing them to take on additional roles such as “IT management, product oversight, or broader organisational responsibilities,” according to the research.
For instance, Ola Mobility’s Suvonil Chatterjee moved to Ola Electric as the chief tech and product officer, while the company made no announcement on its plans to fill Chatterjee’s previous position.
Zomato, Leadsquared, Swiggy, Byju’s, Curefit, Practo, BookMyShow, and Ola Mobility, did not respond to Mint’s queries.
Looking internally
“…recent leadership appointments reflect our commitment to investing in and grooming our top talent internally. This internal focus helps us deepen the leadership pipeline, maximise our team’s potential, drive innovation…,” said Abhishek Mehrotra, chief human resource officer (CHRO), Yubi Group, when asked why the company opted to elevate Bharat Krishnamurthy to the CTO position at Yubi & Yubi Securities, and Krishnendu Majumdar, former chief people’s officer (CPO), to the newly formulated role of chief people & technology officer (CPTO) at Yubi.
Edtech firm Vedantu, in its response to Mint’s queries, said that it opted against external hiring for the vacant CTO position to “capitalise on the internal leadership already within the company.”
“Since its inception, Pulkit (Jain), one of our co-founders, has steered Vedantu as the head of product and technology. Ajith (Reddy), our AVP-Tech, has been a pivotal leader at Vedantu for the last 10 years, driving our technology initiatives forward. While Ranjan (Sakalley) contributed to Vedantu’s journey during his tenure, our decision reflects confidence in our internal leadership’s ability to steer our technology and product innovation forward,” added a Vedantu spokesperson.
CTOs are expensive
This comes at a time when India Inc. is grappling with a fast-evolving digital landscape, where newer technologies like generative artificial intelligence is significantly changing the dynamics of doing business in any industry.
Further, with the ongoing funding winter making funds scarce for Indian startups, and investments into them only starting to show small signs of life now after two years of a funding drought, new-age tech firms have tightened their purse strings and cut down on any excess expenditure.
In late-stage companies, top leaders draw out huge salaries that startups do not seem to be in the position to splurge on, especially during a continued downturn.
“…CTO salaries typically comprise cash (fixed plus variable) and stock components. The cash part can be anywhere from ₹3 to 5 crores annually, and the stock part can range from half a million to a million dollars per year. So, it’s a substantial cost,” Careernet’s Das said.
Moreover, a new external hire would push for more projects, not just maintain the existing system. And this would require substantial investments and risk at a time when funds are limited.
Industry experts also believe that the freeze in CTO hiring is more likely to occur in late-stage companies, as by then, most have built their product-market fit and set up key processes that seldom need too much intervention to keep functioning.
Evolving with time
“The company goes gradually from person dependent, to system dependent, and then likely to process dependency,” said Yagnesh Sanghrajka, founder and CFO of venture capital firm 100X.VC, while adding that most of the companies in the list are in the later stage of their lifecycle maturing into a process dependent organisation.
However, Jaya Kishore Reddy, co-founder and CTO of Yellow.ai, said that while startups that are majorly product-led could afford to eliminate CTO roles, purely tech-focussed startups might find it tougher to follow suit.
“Companies who are natively tech-only companies, for example, pure tech SaaS companies, which cross 30 million ARR (Annual Recurring Revenue), it’s (having a CTO) an absolute must, because there’s a day-to-day changing technology, irrespective of what stage we are in,” explained Reddy.
Tech salaries recover
Another aspect of this evolving paradigm has been the depressed salaries paid to tech talent in the past few years. Tech salaries have experienced significant fluctuations from 2021 to 2023.
During the pandemic, tech professionals were receiving exuberant pay hikes, but by late 2022, startups had begun downsizing and adopting a more cautious approach to hiring and salary increases in those roles due to emerging challenges.
However, according to tech hiring company TopHire, tech salaries have shown signs of recovery, with hikes returning to January 2023 levels in July this year. The median hike percentage now stands at about 38 percent, according to data collated by the company.
Tech salaries had peaked in the first quarter of 2022, with the median hike reaching as high as 65 percent, data showed.
“These past three months we’ve noticed an increase in the average hike percentage received by tech professionals which makes sense cause we’re also seeing a slight improvement in the overall (startup) funding market and recent quarter-on-quarter funding improvements,” said Siddharth Gopi, co-founder of TopHire.
Mint had reported earlier that private equity and venture capital funding for Indian startups had shot up in June to its highest monthly level in the past two years, buoyed by investors topping up funding in their portfolio companies.
Which brings us to the question: Will startups, of all hues, continue to keep their CTO positions empty, or fill it up with expensive hires, when the money tap has just started dripping back into life?
