For the $60 billion Indian software industry, growing attrition is once again proving to be a major headache. Top companies are now realising that wage inflation may be a factor that could erode India?s advantage as an offshoring destination, as countries like the Philippines take over as the next destination in back office voice-based customer support services.
This is quite an about-turn from a year ago when nobody wanted to switch jobs as the recession and drastic cuts in global tech spending dried up the business volumes of Indian software companies, with employees even taking pay cuts. The results for the quarter ended September this year show that the attrition level in the top four software companies remains high, and is more in the middle than the top level. For example, IT bellwether Infosys Technology reported a 17% attrition in the quarter ended September, a historical high. In the quarter ended June this year, it was 15.8% and 11.6% in the quarter ended December last year. The same is the case with TCS, Wipro and HCL Technology (see graph).
In fact, Wipro and Infosys have resorted to high use of sub-contractors to meet the surge in business volume growth. Wipro even had to resort to out-of-turn promotions in the last quarter to counter the rising attrition. Industry analysts say signs of attrition easing will emerge early next year, as strong campus hiring across companies will create a stable bench of fresh recruits. Companies are now raising their hiring targets for the year?TCS plans to hire 40,000 people in the current financial year, 10,000 more than it had guided earlier. So, as business volumes grow, there will be a scramble in recruitment, which could put pressure on margins for the software companies.
