Infosys battles unprecedented worker exodus

May 12 2014, 09:03 IST
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Annual revenue in the year to end-March rose 24.2 percent, lagging growth of 29.9 percent at TCS. (AP) Annual revenue in the year to end-March rose 24.2 percent, lagging growth of 29.9 percent at TCS. (AP)
SummaryInfosys Ltd, once a bellwether for India's $100 billion-plus IT outsourcing industry...

Infosys Ltd, once a bellwether for India's $100 billion-plus IT outsourcing industry, is losing its cachet as the employer of choice for a generation of young IT workers, with staff leaving at an unprecedented pace as the Bangalore-based company struggles to regain ground lost to rivals.

Current and former Infosys staff interviewed by Reuters say morale has been dented by a series of senior management exits and worries about career prospects as the company's revenue and pay increases grow at a slower rate than at competitors such as Tata Consultancy Services Ltd (TCS).

Annual revenue in the year to end-March rose 24.2 percent, lagging growth of 29.9 percent at TCS.

The annualised rate of attrition at Infosys - effectively the number of staff leaving or retiring - was a record 18.7 percent at end-March, 2.4 percentage points higher than a year earlier. That's close to a fifth of the company's workforce of more than 160,000. The attrition rate at market leader TCS was 11.3 percent.

India's outsourcing services industry has relied for years on an army of engineering graduates to build so-called "bench strength", key to winning new contracts in an increasingly competitive industry. A strong "bench" signals to prospective clients that the firm can assign enough technicians to new projects. That signal is weaker when the number of staff quitting a company rises to uncomfortable levels. It also does little to attract new hires in the close-knit IT world.

"We were all excited when we joined Infy," said Sandeep Chaudhary, who last month quit Infosys after two years to go and work at a rival. "It has the best training and campus, but the company fails to utilise the training it gives its employees."

TAKING STEPS

Infosys announced an average 6-7 percent pay rise last month for India-based staff, below the average 10 percent raise at TCS. Third-ranked Wipro Ltd said it plans raises of 6-8 percent from June.

Offering lower pay increases than its rivals could mean attrition levels at Infosys will rise further, UBS wrote in a client note last week. UBS cut its Infosys stock rating to 'Sell' from 'Buy'. "Such high levels of attrition could impact revenue acceleration," it added.

Infosys President Pravin Rao, a leading candidate to take over as CEO when S.D. Shibulal retires in January, acknowledged that attrition is higher than the 12-13 percent rate the company is comfortable with.

Rao said Infosys is taking steps to stem the flow of those

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