Supply side challenges for IT/BPO in India
With the market demand ramping up for Indian IT and BPO vendors, finding and keeping right talent is once again becoming an important vendor management discussion for the clients and a high priority HR discussion for the IT/BPO firms.
As a number of clients continue to be cautious on the economy, off shoring work has steadily ramped up. Less stellar than the earlier growth, the off shoring growth is evident in the quarterly earnings of off shoring firms and the ramp up of hiring targets by these firms.
With a post recession up tick in the demand for off shoring services, a number of Indian firms are getting aggressive about how to find and more importantly keep employees. Attrition rates have slowly inched back up, wage hikes are being announced by companies to hold on to employees and campus hiring is seeing a surge as the concept of bench strength again trickles back. Ramping up for new client engagements and transitions are taking longer as finding the right people at the right price is tougher now.
Table 1: Attrition Rates in Off shoring Firms
| Company | Attrition a/o June 2010 | Previous Quarter attrition | Previous Year same quarter attrition |
| Wipro | 15.8% | 12.1% | 9.8% |
| Infosys | 15.8% | 13.4% | 11.1% |
| Cognizant | 20.7% | 16.4% | |
| Genpact | 26% ( 6 months) | 22% ( 6 months) | |
| TCS | 13.1% | 11.8% | |
| WNS | 42% | 43% | 23% |
Post 2008, when the global economy was in a freeze mode, the Indian firms had reduced campus hiring, limited employee perks, pay raises, promotions. For a number of employees in this industry, which had only seen a dramatic growth, the slowdown was a tough wakeup call. For a number of these employees, they had limited opportunities to move to and stuck around waiting for the right opportunity. These employees although more wiser in their career tracks are now willing to jump ship for the right opportunity and pay hike and have less loyalty to their employers. At the same time the jump to a new opportunity also is a longer process as employees are now doing their due diligence before jumping ship, specially the middle managers.
Where India has a demographic advantage of a large growing young workforce it does face the challenges of an archaic education system which ill prepares people for real life global workforce and adds to the supply side challenges for global firms. Where in companies have taken the ownership of training their employees and make them more marketable, during the last couple of years when the markets were slow, the firms were reluctant to invest in training adding to the supply side vows.
For companies which are working with these vendors in India, these supply side challenges is a cause of concern. These companies are finding that where the teams have spent time together building and training staff with vendors, key employee leaving causing more disruption than if the same employee was local.
There are a few issues which emerge due to the supply side challenges for companies who are outsourcing work or planning to outsource work.
- Firms which are outsourcing need to be prepared for increased cost of transition, specially those starting out new as it takes longer for firms in India now to find and on boarding the right candidates.
- Firms have to be careful that they are not getting the less qualified ( Team B or C or D) staff for their assignment as this has serious downstream impact. A number of vendors would try to pass on candidates which may not be qualified for the task.
- HR management even if the staff is a vendor staff is a critical part of planning for globalization. The firms have to take a higher degree of ownership to help retain key staff.
- Knowledge retention strategies have to be revisited to ensure that higher attrition results in limited disruption of business as usual.
- For clients looking for vendor staff, it is important to get and look for the right level of staffing. In a number of instances we have found that if you look for the superstar all the time, it is not a viable option. Define the role clearly on what you are looking for, and find people that fit the role and can grow in that role.
- Training and replacement planning for staff leaving has to be planned as part of the discussion with the vendors to ensure that the companies are not being charged for higher attrition or staff turnover. Plus firms have to retain more onshore staff to deal with higher attrition offshore (increased cost).
Overall the supply side challenges will continue to exist with emerging economies where the gap between supply side and demand both domestically and globally is very high. That coupled with the fact that the job creation in the US markets is still lagging and there is a talent base available in the US which is willing to work for less.
For firms which are outsourcing, planning for supply side challenges in India coupled with availability of local talent should be an important part of looking at their outsourcing roadmap on how they operate today and for the future.
Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a specialized globalization firm providing advisory, training and staffing services to firms in US and India. We work with firms in the US which are exploring low cost options for IT, Business Process work and looking at ways to further optimize cost, manage operational risk and setup presence in India. Contact us at info@corrystone.com to learn more about how we could make your journey more productive by leveraging our experience.
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