The “A” word (attrition) is back in outsourcing companies

April 7, 2010

With uncertainty easing, attrition, the biggest nightmare for HR managers in IT services and outsourcing companies, is on the horizon while for some firms, it is already here. So just how are the big 3 IT services firms faring on the attrition and hiring front? Consider the following attrition rates (as of January):

  • Infosys. Attrition at Infosys rose from 10.9% the last quarter to 11.6%. However, a March Wall Street Journal article quoted a CLSA Asia-Pacific report as saying that there are unconfirmed rumors that 4,000-4,200 employees have resigned at Infosys for the month of February alone – well beyond the 1,200 employees who should be resigning each month (as of December 31, Infosys had about 109,882 employees). Nevertheless, it was also noted that Infosys had the largest bench strength in the industry at almost 20,000 free resources.
  • Tata Consultancy Services (TCS). Attrition at TCS has been stable at around 11.5% – although company officials expect this rate to rise. However, the Wall Street Journal noted in February that TCS will go on a hiring spree and hire up to 30,000 new employees after the next fiscal year begins on April 1. This is on top of the 11,500 planned hires for the first quarter of 2010. It was also noted that 70% of new hires for the new fiscal year will be fresh graduates and more than 2,000 employees will be recruited from outside India.
  • attrition is back The A word (attrition) is back in outsourcing companies

  • Wipro. Wipro had an attrition rate of about 13.4% – up from an average of 8.9% over the past three quarters. Hence, the Hindu Business Line noted that they were planning a salary hike for February along with promotions to help prevent attrition from rising further while recruitment initiatives would happen on a demand basis and include a mix of campus hires and science graduates along with experienced talent. Meanwhile, the Hindu Business Line quoted Girish Paranjpe, the Joint-CEO of Wipro’s IT Services group, as saying that the company’s bench strength was around 7,500 to 8,000 on an employee base of about 103,000 while the industry bench strength standard is usually twice that. 

However, another Hindu Business Line article noted that the brunt of any rise in attrition rates will likely be borne by mid-size software outsourcers who could see attrition rates reach the 15% level. Moreover and since the big players have mostly not been hiring for some time, employees with midsize firms are more likely to consider jumping to larger companies if they are offered the right opportunity.

Meanwhile, utilization rates (that is, the number of employees billed per hundred verses those who are on the bench) are also increasing at the big 3 IT services firms. According to the Hindu Business Line, utilization rates rose from 67.3% to 68.8% at Infosys, 73.6% to 77.2% at Tata Consultancy Services (TCS) and 70.8% to 73.2% at Wipro.

Nevertheless, as both utilization and attrition rates rise, its time for companies to once again think about long-term strategies for retaining employees. As Raman Roy, the chairman and managing director of BPO firm Quattro, noted in the Financial Express, meddling with salary and benefits is a short-term strategy (he chooses to focus on in-house training to create an efficient group of high achievers) while attrition is merely a symptom and not a disease. In other words, its the symptom of an increasingly healthier job market and economy for outsourcing.


Comments

6 Responses to “The “A” word (attrition) is back in outsourcing companies”

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  3. Jack on April 10th, 2010 5:50 am

    With the markets on the course to recovery and with more projects opening up, attrition is surely going to rise in the subsequent months as workforce who have been enforced to continue will start looking for change. A number of people have confided that they have lost their employer loyalty and will switch to a stable, well paying job as soon as they get an opening

  4. Herry on April 11th, 2010 10:43 pm

    With the markets on the course to recovery and with more projects opening up, attrition is surely going to rise in the subsequent months as workforce who have been enforced to continue will start looking for change. A number of people have confided that they have lost their employer loyalty and will switch to a stable, well paying job as soon as they get an opening

  5. Prem on April 19th, 2010 5:26 pm

    Interesting, Attrition is coming back in Indian outsource companies, but still US unemployment is close to 10%. Not sure how long US companies will outsoruce

  6. A word on May 6th, 2010 1:33 am

    As the global economy improves the Attrition has to come back. It is not only in India but also everywhere. In India since the outsource companies are the one hiring in bulk numbers, you’re seeing the effect on that industry.

    -Nandhan

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