Employee attrition among global IT vendors a significant concern: report

Employee attrition among global IT vendors, including top Indian firms, has been a major concern for their clients across the world as it affected project costs and timelines, according to a report by global research firm Everest.

The IT outsourcing industry is largely responsible for running the world’s technology today and serves as the backbone of nearly any global industry, including energy, trade, finance and logistics. The report said, all of these industries that we rely on to keep global economies afloat and societies functioning are heavy outsourcers of IT.

Attrition for different Indian companies varies between 7 per cent and 17 per cent.

“Voluntary attrition for IT services calculated on an annualised basis increased to 15.2 per cent, as demand for talent increased,” Pravin Rao, COO, Infosys, told analysts while discussing the March quarter results. In another investor call, Brian Humphries, CEO, Cognizant, said, “The impact of the pandemic on industry attrition rates, absenteeism and client delivery remains somewhat uncertain.”

“We faced a lot of attrition over the last 18 months. Though the partner provided resources on time, the knowledge management process was not streamlined, which affected our project timelines,” a head of new product development of a Fortune 500 diversified financial group, was quoted in the report. Over 500 global companies - with revenue ranging $1 billion to $60 billion - from that use the services of ISVs were interviewed for the report.

Cultural fit

Cultural fit for onshore talent was identified as one of the most important aspects for enterprises that preferred skill that is proficient in the local language and can understand the geography-specific nuance of their businesses. Companies also look for technology vendors that can provide the right level of technical and domain expertise. They want people who understand the industry well and can synergize their technical and domain knowledge to drive business outcomes.

Due to the pandemic, talent challenges worsened as many service providers weren’t able to effectively transition remote. Many in-flight projects had to be cancelled due to travel restrictions, and Covid-19 impacted the bandwidth of resources available, said Yugal Joshi, Vice President, Everest Group, one of the authors of the report.

Attrition has been a concern and now rapidly growing as the western economies open up. There are instances where service providers and enterprises are both losing talents, especially in the onshore regions. Given the travel restrictions persist, the “landing resources” model of Indian service providers has faced massive challenges, he added.

Heating up of onshore talent

As visa workers cannot fill positions anymore for some time, the local onshore talent market is witnessing significant heating up, resulting in attrition. Clients have to pay significantly more to retain talent, and some are building a 'talent war chest' just to sail through this troubled period.

Project timelines have been reasonably met. However, quite a few in-flight projects were shelved or delayed, but they eventually were taken up and completed. Given onshore talent issues as described above, many engagements that otherwise would have needed onshore presence were delivered 100 per cent from offshore locations such as India. He added that the remote transitioning, compliance and training took more time than expected, but it did not impact the clients materially.

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