A recent report by EconomicTimes mentions that brokerage firm CLSA suggest that close to 4,000 people may have left Infosys in the month of Februrary. 

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Infosys Attrition Going Higher

Though the Infosys head of HR, Nandita Gurjar seems to have denied the high number of people indicated in the report , but confirms the fact that  attrition is rising in the firm. She confirmed that the attrition is rising but not even close to the half way mark. Typically in these larger firms the number of people leaving are close to 1500 a month.

In an earlier post I had talked about attrition rates going up in Indian firms and the potential impact of that and how if your organization is  with offshore vendors you need to re visit your planning and risk management plans to try to mitigate the risks. There is a serious time and cost impact if this issue is not managed correctly.

The number does appear to be on the higher side and folks we have spoken with have seen a spike in the attrition rate but not as high as the 4,000 number. Quarterly earning for this quarter by Infosys will be closely watched to get the real details around attrition in larger firms.

Firms like Infosys, TCS which have good training programs and spent the lean time last year taking people through more training courses, specially the ones who were not on projects are good hunting grounds for firms looking for qualified employees. Some of these people who have been on bench also have been there too long and are looking at opportunities where they feel more secure if they are working on actual client engagements vs internal projects. 

Is bench strength the answer

Picture: NY Times

Bench strength , which some of the larger firms have more of than the smaller and mid size firms may be a tool , the vendors use to manage attrition but for their clients it is still a challenge. Resources , specially trained resources are harder to replace. One of our clients which is working with a large offshore vendor continues to see challenges in staffing and replacing  outgoing team member in the vendor staff despite a large bench strength available.  You just cannot replace a vendor staff by pulling someone from the bench, specially if the process, technology you are offshoring is complex. For lower end process it is a positive, not for complex, long ramp up learning time processes, technologies.  There could be a fairly high cost impact if not managed correctly.  One of the issues we try to address with our clients as they plan their transition projects is around knowledge transfer – during transitions and on going.

Here are some attrition numbers for some of the vendors as per their last quarterly report ( End of Dec 2009).

1) Infosys:
Attrition at 11.6%,
Total Employee Strength 109,882,
Net Addition this quarter 44,29 (Additional Details)
2) TCS:
Attrition Rate – 11.5% ( IT Services – 10.8%, BPO – 18.3%)
Total Employee Strength  143,761
Net Addition 7,692  (Additional Details)
3) Wipro:
Attrition Rate – IT services – 14.3%, BPO – 15%)
Total Employee Strength 102,746
Net Addition 4,855
4) Cognizant:
Attrition Rate: 11.2%
Total Employee Strength: 73,400
Net Addition : 10,300 ( includes UBS acquisition) (Additional Details)
5) Genpact:
Attrition Rate: 23% ( Pure play BPO firms have higher attrition)
Total Employee Strength: 38,600
Net Addition : 2,400 (Additional Details)
6) WNS:
Attrition Rate: 31% ( Pure play BPO firms have higher attrition)
Total Employee Strength: 21,392
Net Addition : 149 (Additional Details)
7) Syntel:
Attrition Rate: 11.2%
Total Employee Strength: 12,567
Net Addition : 1,080
iGate:
Attrition Rate:
Total Employee Strength: 6,910
Net Addition : 530
9) HCL Technologies:
Attrition Rate: IT Services – 12.8%, BPO Services – 21%
Total Employee Strength: 55,688
Net Addition : 1,691
10) EXL Services:
Attrition Rate: 22.6% ( billable)
Total Employee Strength: 10,736
Net Addition : 243

Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a specialized globalization  firm providing advisory, education 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 and manage operational risk. For firms based in India  we help with marketing presence , M&A & client management services in the US. Contact us at info@corrystone.com  to learn more about how we could help you.

Patni Computer Systems, a leading global IT and BPO services provider, will host a ribbon-cutting ceremony Friday, March 12, to unveil a new state-of-the-art IT business center in Queretaro, Mexico, that will expand Patni’s global delivery initiative and serve as the hub of the company’s expansion efforts in Latin American markets.

Patni is moving from its temporary facility into a permanent location in a high-rise building at ITESM Technological Park of Tech de Monterrey. The new center occupies 11,000 square feet on two floors in ITESM Technological Park — more than eight times the capacity of its temporary location. Patni currently employs 40 in Queretaro. The company has plans to increase employment in the local facility to 200 by the end of 2010, with the bulk of the new hires coming from the local area.

“For the last year, Patni has been systematically increasing its focus on regional operations to enhance responsiveness to customer business requirements,” said Naresh Lakhanpal, president, Patni Americas. “The opening of the Queretaro facility represents an important step in our corporate strategy, showcasing our ability to invest locally by building regional delivery centers that leverage the talent base of local communities.”

Cutting the ribbon at the March 12 grand opening ceremony will be Lic. Jose E. Calzada Rovirosa, Constitutional Governor of the Queretaro State. The more than 400 attendees will include representatives from the state and federal governments and local industry. Patni representatives will include Asim Malik, a vice president with one of the company’s leading account groups; Ganesh Iyer, head of the company’s insurance and financial services business units; and Enrique Austria, director of operations and country head, Patni Mexico.

“Patni’s investment in our community illustrates how Mexico is gaining stature as a global IT hub,” said Rovirosa, the Queretaro governor. “Our regional government has supported this project, and we stand ready to welcome other IT providers with our skilled talent pool, competitive costs, improved language skills and other business benefits.”

The location offers Patni preferential access to customers in North and South America and within Mexico, the world’s 13th largest economy with an IT market of $5 billion. Customers will be able to leverage a “near-shore” engagement model and global delivery system simultaneously, allowing for seamless interaction on IT development projects, easier management of customer relationships and greater oversight on project tracking. This will reduce engagement costs while accelerating time to market.

“This move allows us to serve an increasing demand from clients in North America and Latin America for near-shore resources,” said Austria, head of Patni Mexico. “We plan to use our Queretaro facility as the launching point for our business activities within the country and the region.”

Queretaro is Patni’s 22nd development center, expanding a global presence which already features near-shore centers in the United States and Europe.

Mahindra Satyam, the brand identity of Satyam Computer Computer Services Ltd. (NYSE:SAY), a leading global consulting and IT services provider has signed a new four year offshore contract with KMD, one of Denmark’s leading IT companies. KMD, which specialises in the public sector, signed a renewed contract with Mahindra Satyam for the next four years worth approximately $48 million ending in December 2013. The new contract is an extension of a previous contract that was due to expire this year which involved the supply of application development, testing and application support services particularly in the area of SAP which is a growing business for the Danish IT company.

The new contract involves stronger partnership and multi-fold increase in business commitment with offshore work conducted in a development centre in Bangalore, India. The scope of application development work covered will primarily include SAP, as well as other technologies such as Mainframe applications, .Net, Java, BizTalk, WebLogic, PL/1, Sharepoint and MQ Series.

According to Lars Monrad-Gylling, CEO of KMD, “We have chosen SAP as a strategic technological platform for our development work and consider it a common cornerstone to enable coherence between systems, global market standards and to offer our customers greater openness and freedom of choice. Mahindra Satyam’s outstanding competencies in this area were a major factor in our decision to extend the contract.”

He added, “The offshoring project with Mahindra Satyam allows KMD to achieve even greater growth in the SAP development area and allows us to offer customers a reduced time to market. We consider Mahindra Satyam among the world leaders in their field and the two companies have already been engaged in a highly successful partnership.

C P Gurnani, CEO of Mahindra Satyam commented, “We view this significant contract award as a great endorsement of the quality of work we have already delivered and a real testament to the success of the partnership that has developed between the two companies. We look forward with anticipation to the next phase of this relationship.”

About Mahindra Satyam

Mahindra Satyam (NYSE: SAY) is a leading global business and information technology services company that leverages deep industry and functional expertise, leading technology practices, and an advanced, global delivery model to help clients transform their highest-value business processes and improve their business performance.

The company’s professionals excel in enterprise solutions, supply chain management, client relationship management, business intelligence, business process quality, engineering and product lifecycle management, and infrastructure services, among other key capabilities.

Mahindra Satyam is part of the $6.3 billion Mahindra Group, a global industrial federation of companies and one of the top 10 industrial firms based in India. The Group’s interests span financial services, automotive products, trade, retail and logistics, information technology and infrastructure development.

Mahindra Satyam’s development and delivery centers in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore, and Australia serve numerous clients, including many Fortune 500 organizations. For more information, see www.mahindrasatyam.com, Follow us on Twitter: http://twitter.com/mahindra_satyam

About KMD:

KMD is among the largest Danish-based IT companies and has more than 35 years experience in development, operation and maintenance of some of Denmark’s largest IT systems. KMD develops and provides IT solutions for the local authority, state and corporate markets in Denmark. KMD has more than 3,000 employees in Denmark and annual revenue in excess of EUR 500 million. KMD is owned by EQT and ATP.

KMD has chosen SAP as strategic technological platform for the development work. The choice of SAP as a common cornerstone means better coherence between systems, global market standards, and greater openness and freedom of choice for our customers.

Here are some attrition numbers for some of the vendors as per their last quarterly report ( End of Dec 2009).

1) Infosys:
Attrition at 11.6%,
Total Employee Strength 109,882,
Net Addition this quarter 44,29 (Additional Details)
2) TCS:
Attrition Rate – 11.5% ( IT Services – 10.8%, BPO – 18.3%)
Total Employee Strength  143,761
Net Addition 7,692  (Additional Details)
3) Wipro:
Attrition Rate – IT services – 14.3%, BPO – 15%)
Total Employee Strength 102,746
Net Addition 4,855
4) Cognizant:
Attrition Rate: 11.2%
Total Employee Strength: 73,400
Net Addition : 10,300 ( includes UBS acquisition) (Additional Details)
5) Genpact:
Attrition Rate: 23% ( Pure play BPO firms have higher attrition)
Total Employee Strength: 38,600
Net Addition : 2,400 (Additional Details)
6) WNS:
Attrition Rate: 31% ( Pure play BPO firms have higher attrition)
Total Employee Strength: 21,392
Net Addition : 149 (Additional Details)
7) Syntel:
Attrition Rate: 11.2%
Total Employee Strength: 12,567
Net Addition : 1,080
iGate:
Attrition Rate:
Total Employee Strength: 6,910
Net Addition : 530
9) HCL Technologies:
Attrition Rate: IT Services – 12.8%, BPO Services – 21%
Total Employee Strength: 55,688
Net Addition : 1,691
10) EXL Services:
Attrition Rate: 22.6% ( billable)
Total Employee Strength: 10,736
Net Addition : 243
10) mPhasis :
Attrition Rate: 
Total Employee Strength: 35,690
Net Addition : 2,166

For the last 18 months attrition rates in IT/BPO firms out of  India and captives has been a non issue. A number of firms in their quarterly earning reports have also continued to show improvement in their ability to hold on to employees. (Q4,-2009 attrition: Cognizant Attrition, WNS attrition, Genpact Attrition, TCS Attrition, Infosys Attrition) . Compare this to the attrition rates for Q4-2008 which was around the time the financial crisis started, and the attrition rates showed signs of getting better ( Attrition Rates 2008 ) . This improvement in attrition rates was less   about the ability of the outsourcing firms to manage their employees  and more around the market crisis where the jobs and projects  disappeared.

 In some of my earlier posts, I had commented that if you look at glass half full, this was a relief  for companies offshoring their work as attrition was no more on their top list of risks.  This may be about to change with the markets opening up in India and  employees who  have felt they got the short end of the stick looking to switch jobs and bolt out of the door as offers and opportunities start coming back. With a number of firms now opening up their hiring process, going back to campuses for new recruits, if you have been working with offshoring vendors in India,  it may be time to plan for a spike in attrition rates.

The improved attrition rate

The market slowdown which took everyone by surprise and despite the brave face put  by outsourcing vendors that the financial crisis is good for the offshoring business, the impact of the economic crisis was global. It impacted the offshoring growth engine hard like the rest of the world . Employers who were jostling each other to offer better employee perks to retain and hold on to employees who had never seen an economy down cycle, realized that they dont need to do the pampering any more. With the slow down on the revenue side, vendors with operations in India had to continue to look at cost side to manage their growth expectations.  Employee perks started to go away, and salary increases became more performance driven and market driven if any. Given that the number of opportunities also suddenly disappeared overnight, the employees had no choice but to stay.

With the markets on the path to recovery ( in India)  and more projects going to vendors, attrition is bound to rise in the next coming months as employees who have been forced to stay will start looking for change. A number of folks I speak to in India have confided tha they have lost their employer loyalty and will switch to a stable, well paying job as soon as they get an opportunity.

The attrition rate may never reach the highs they were  before the crash , but have the potential to get back on the top of the risk lists for companies offshoring. The reason the attrition rates will not climb to their pre crisis days is that the employees while looking for change are more cautious to where they are going. Earlier it was less about the firm the employees were joining and more about the as employees even when looking for a change are not going to see a big jump in their pay checks or perks. Though a number of them will look for more ’stable’ firms. Smaller and mid size firms which suffered the most during this downturn may be the ones which will get affected the most in terms of rise in attrition rates. Larger firms can offer more stability to the employees which they will want now.

Overall in the marketplace though the salary structures will continue to be more rational and people looking for a change will have to understand the new market dynamics

For companies who are working with vendors in India it is though time to dust of your contracts and revisit the attrition, training and retention plans with your vendors.

Mohit Sharma is the CEO of Corrystone Global Partners. Corrystone is a specialized globalization  firm providing advisory, education 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 and manage operational risk. For firms based in India  we help with marketing presence , M&A & client management services in the US. Contact us at info@corrystone.com  to learn more about how we could help you.

As per Celent, Financial services companies spend in 2009:
$350 billion globally on IT
$120 billion in North America.
50% spend on : software, internal head count, and external services.
70% of this spending has gone to keep the lights on and other routine maintenance expenses.
The investment required to replace and modernize applications that are well past their sunset date is estimated to be between $250 billion and $300 billion

http://www.businessweek.com/globalbiz/content/mar2010/gb2010039_433787.htm

The F&A space is the new battleground for a number of mid size firms looking to distinguish themselves in the crowded and competitive BPO space. This is also where a number of the IT firms are trying to stake a claim in as their core expertise.  A number of the mid size firms we believe have to continue to figure out ways to grow in a market which is becoming very commoditized. Acquisitions like this is one way to build revenues and expand your expertise.
Aditya Birla Minacs, a global business solutions company, today announced the acquisition of UK-based Compass BPO Ltd, a leading pure-play end-to-end Finance and Accounting (F&A)services provider. Compass BPO has appeared in the top 15 upcoming F&A BPO players in a recent Gartner report. It was also cited in the Top Offshore BPO providers by FAO Today magazine™, and in the ‘Global Services 100 – 2008 list’ by NeoIT™ and Global Services™.Through this acquisition, Minacs will take over all the operations of Compass across the UK, US,Middle East and in India, bringing Minacs’ F&A employee strength to 600. The founders of Compass – David McCullough and Mark Atkins – will join Minacs’ management. This announcement comes close on the heels of Minacs’ recent inauguration of its new Global
F&A Center of Excellence in Chennai. Its end to end F&A services portfolio now includes transactional accounting, knowledge based services (e.g. financial planning and analysis, research, budgeting/ forecasting and reporting), risk support services, business solutions (implementation and Hosting/ DBA services) and IT-based financial solutions and services.Commenting on the deal, Deepak Patel, CEO – Aditya Birla Minacs says, “With Compass forming the core of Aditya Birla Minacs F&A, we are now strongly positioned to be an integral part of our clients’ core processes. Compass is already a highly respected force in the F&A space with the full spectrum of capabilities. With 10 years of operations, it has excellent client credentials, a highly qualified team, and strong domain expertise. This move is part of our strategic roadmap,and brings to Minacs significant credibility in the fast growing F&A business”.
David McCullough, CEO – Compass BPO said, “We at Compass are excited at the opportunities for accelerating growth by leveraging Minacs’ global platform. Our best-in-class F&A expertiseand value-added business solutions will bring great advantages to Minacs’ Fortune 500 client base. We are also delighted to be part of a team that is known for its heritage of long term partnerships with clients”. Minacs has invested significantly in developing new capabilities in the recent past. F&A is a key focus area, including deployment of proprietary point solutions, which integrate with any ERP,allowing easy F&A process ransition, client control and transparency. Similarly, Compass BPO provides business intelligence solutions for financial analysis and reporting enabling clients to make quick and informed business decisions.

About Aditya Birla Minacs

Aditya Birla Minacs is a pioneering business solutions company that partners with globalcorporations in BFSI (banking, financial services and insurance), TIME (telecom, technology infrastructure, media, and entertainment), manufacturing and the public sector. We leverage years of process, domain and technology expertise to deliver superior business value to clients
with our seamless customer lifecycle and enterprise services. 13,000 Minacs experts across 3 continents and 29 centers spanning Canada, Germany, Hungary, India, Philippines, the UK and
USA power our solutions through a global delivery model that helps our clients enhance revenues, profitability and customer service.
Minacs is a subsidiary of Aditya Birla Nuvo Ltd.
Visit http://www.minacs.adityabirla.com  for more information.

The article in Financial times talks about the challenges of suing an Indian firm by overseas stockholders and claiming damages.  The suit is against Satyam whose chairman confessed to a fraud in the company to the tune of US $ 1 billion and is being bought by shareholders who hold ADR ( American Depositary Shares) in Satyam. Satyam case will test rights of foreign investors in Indian companies

Satyam which is now part of Tech Mahindra  continues to have their fair share of legal issues and are keeping a number of cross border legal firms pretty busy.

Two firms – US based Bridge Strategy Group and Ghent, Belgium-based supply chain solutions firm S&V Management Consultants which were acquired by Satyam have come to legal closure on their issues with Satyam.

Satyam had also purchased back in April 2008 the market research and customer analytics business unit of Caterpillar the construction giant and was planning to leverage that to launch there Knowledge Process Outsourcing Services. That disputes looks like is still ongoing and not resolved.

Two Satyam disputes settled amicably

Satyam and Upaid also continue to spar over their tax and legal issues.

Satyam, Upaid in tax row

Domestic Indian markets are an area of focus for IT vendors in India and large established multi nationals with operations in India. A number of these deals seem to be going to the larger firms. IBM, Accenture have had a fairly high success rate in winning these domestic deals. If the government press release is to be believe there is about $ 10 billion in money for IT governance projects being set aside in India. The $10 billion Indian e-Governance marketplace

Press Release

Wipro Infotech, the India and Middle East IT Business of Wipro Ltd (NYSE:WIT) , has won a turnkey project from the Financial Intelligence Unit – India, Ministry of Finance.

As part of the project, Wipro will implement FINnet (Financial Intelligence Network) for the Financial Intelligence Unit.

The scope of services includes development of portal, data warehousing, de-duplication, analytical application and ERP implementation at the data centre and disaster recovery site.

The project is scheduled to be completed in 24 months, in different phases, with a further service period of 36 months.

According to a press release, IT enablement of key processes would ensure substantially higher productivity, faster turn-around-time and effective monitoring in all areas of the unit’s work.

Economic crimes

The project assumes significance in light of growing economic crimes within the country and the Government’s efforts to arrest it.

With this project, the Government intends to use technology to bring efficiency into analysis of data, added the release.

Mr Arun Goyal, Director, Financial Intelligence Unit India, said, “Wipro has been selected through an open and stringent bidding process. We are keen on timely implementation of the project as it will significantly enhance the unit’s capabilities to collect financial information from various reporting entities, analyse it and disseminate actionable information to various law enforcement and intelligence agencies.”

Mr Ranbir Singh, Head, Government Vertical, Wipro Infotech, said, “This is a very prestigious project for us and we are delighted to have been selected for it. We are confident this implementation will bring in more effective governance from both the economic and security point of view.”

Sunera Technologies (Sunera), a Michigan Corporation and a pioneer in enabling Technology and Services companies worldwide, announces the addition of a new ISV customer based out of Massachusetts under its unique Collaborative Offshore Initiative (COI) program. Under the terms of its unique Collaborative Offshore Initiative (COI), Sunera will set up a software product development facility in India for this customer, leveraging its India experience, infrastructure, operations and best practices to manage India initiatives. This customer foresaw the short-term and long-term benefits of COI. Sunera plans to help them to build and operate for the term of the contract and then transfer ownership to them at the end of the Term.

Sunera has another unique initiative called Collaborative India Initiative (CII) besides Collaborative Offshore Initiative (COI). Through these initiatives Sunera assists its partners in four areas 1. Business Development Program (BDP): Expand business in India market 2. Product Development Program (PDP), Build and Operate a Product Development Center in India 3. IT Cosourcing (ITC): Providing alternate to Outsourcing, helping IT leaders with ability to have better control, see greater value from their India Initiatives and 4. Business Process Management (BPM) – reduce operating cost of business operations like market research, inside Sales, recruiting, customer support, procurement etc.

This new partnership envisages to look at India beyond COI and Outsourcing Product Development to increase their sales in India’s market as well and will be leveraging Sunera’s CII as well. On its part Sunera will bring its India expertise, market know-how, offshore best practices, operational know-how and physical infrastructure to ensure that the partner will be highly successful without having to deviate from the core strength which is Software Product Development and capture new markets.

Mr. Ravi Reddy, Managing Partner for Sunera Technologies, said, “This partner was ahead of the curve and quickly saw the potential of Collaborating India Initiative and the risks of going for a captive center without having the deep expertise to run business in India.” He continued to add that “With over 100 Years of management experience in the leadership and multiple similar initiatives being successfully executed, Sunera is well positioned to be a leader in helping companies find an Alternate to Outsourcing and also launch their products in India Successfully.”

Sunera expects the Hyderabad Center for this ISV partner to be in operation within three months, and it will provide additional expansion capabilities for future growth and capabilities including India Business Development and Business Process Management (or also called as Business Process Outsourcing).

About Sunera Technologies Inc.

Sunera Technologies, has pioneered Collaborative Outsourcing through its unique approach of partnership for Revenue Maximization and not just cost optimization. It has focused on enabling its customers to take advantage of India with its unique Collaborative India Initiative and Collaborative Offshore Initiative model that delivers benefits of both worlds: Outsourcing and Own Captive Center. Sunera now has over a dozen customers helping them with building India delivery and Business Development capabilities.

SOURCE Sunera Technologies Inc.