Attrition remains a daunting task for IT firms

Bengaluru: Indian IT services companies are unlikely get much respite in employee attrition front in the second quarter of current financial year despite moderation in demand for technology talent. Recently announced Q4 earnings of global IT giant Accenture last week gave the early glimpse of the trend.

According to industry experts, though hiring momentum has slackened, it remains strong for certain skillsets. They opined that despite layoffs seen in the startups and certain projects of IT firms getting affected, IT firms are likely to see much change in attrition front in Q2 of FY23.

"We don't expect much change in employee attrition level in Q2 of FY23. Though the pace of hiring has come down, demand for technology talent remains strong for certain skillsets. Therefore, attrition may be down for the quarter, but on LTM (Last Twelve Months) basis, there may not be much move," Supaul Chanda, vice-president of technology recruitment firm Experis of Manpower Group, told Bizz Buzz.

The management commentary of Accenture also reflected the same trend. "Technology skills are in demand by both companies as well as our competitors because technology is at the core of strategy. So, we are expecting to have a continued tight labour market. The fact that there have been some layoffs in certain markets is not really, I think, going to change much," Kathleen R McClure, Chief Financial Officer at Accenture, said during the post-earnings analyst call.

"We do expect wage inflation to continue, and we have factored that into our guidance," the CFO said.

Recently, Microsoft's a news-related projects executed by HCL Technologies got cancelled, leading to loss of jobs of 350 employees. Similarly, sources in the know said that one of the Facebook's project done by Accenture is likely to be cancelled this month. The work is likely to outsourced to a Singapore-based firm.

Globally, many technology giants including Google, Microsoft, Meta has discontinued new projects along with cancelling some. Apart from established technology firms, Indian startup ecosystem has seen multiple instances of laying off employees.

Despite such changes in the job market, Indian IT services companies are likely to see fall in their attrition levels. In the first quarter of FY23, most large and mid-tier IT firms have seen more than 20 per cent employee attrition level. Such high attrition has prompted companies to increase compensation of staffers, which has squeezed operating margins.

To contain such cost pressure, many large and mid-tier firms including Infosys & Wipro have deferred or cancelled variable payouts. All eyes will be on the management commentary of Indian IT companies, which will kickstart the earnings season on the first half of next month.