Attrition in IT sector now a global trend
It's hitting the key sector hard, pushing up subcontracting cost
image for illustrative purpose
Bengaluru: Rising employee attrition seen in the IT industry in the last three quarters is not limited to India, but largely a global phenomenon. According to experts and industry officials, even markets like Latin America and the US have the same high employee churn issues.
"Sourcing and supply challenges are there in the US as well (like India). Also, when clients are looking into other geographies like Latin America, they are also facing a similar issue. It's a broad cross-geographic shortage of good talent right now," Joseph Anantharaju, executive vice-chairman, Happiest Minds Technologies, told BizzBuzz during an interaction.
Attrition has seen a rising trend in the September quarter with many companies witnessing more than 20 per cent attrition rate. In Q2 of FY22, Infosys saw its attrition rising by 620 basis points over the first quarter to 20.1 per cent. Similarly, Wipro's attrition rate reached 20.5 per cent in Q2 of FY22, up from 15.5 per cent in Q1.
For HCL Technologies, attrition rate touched an all-time high rate of 15.7 per cent, up from 11.8 per cent reported in the first quarter. Market leader Tata Consultancy Services (TCS) had the lowest attrition in the industry, which came at 11.9 per cent in Q2 from 8.6 per cent reported in the first quarter. Cognizant, the India born IT firm with more than 70 per cent of employees working from the country, saw its attrition rate at 33 per cent during this period. The talent shortage in other geographies is evident from the rising expenses on subcontractors.
"We had 50 basis points of increase on subcontractor cost. We've seen our subcon costs going up due to higher fulfillment," said Nilanjan Roy, Chief Financial Officer of Infosys.
On an average, subcontracting forms about 10-15 per cent of total employee cost of large IT services firms. This ratio, however, is bigger for mid-tier IT firms as they rely more on subcons in key geographies like the US for executing project work due to lack of employee pyramid. However, as offshoring has seen an increase in recent quarters and Indian IT firms aggressively hire freshers to overcome talent shortage, the cost coming from subcontractors is likely to reduce in coming quarters.
The top-4 IT services companies are planning to hire around 160,000 graduates from campuses this fiscal year, which is higher than the earlier projection of 120,000. Meanwhile, IT services firms are also building up employee pyramid in key geographies like the US and near-shore centres like Latin America to tide over the talent crisis.
