Article: The curious tale of attrition within the Indian IT sector

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The curious tale of attrition within the Indian IT sector

India’s IT sector has traditionally been one of the largest job creators. With market situations evolving, how has the sector kept pace and managed to put a stop to its huge attrition rates? We take a look.
The curious tale of attrition within the Indian IT sector

One immediate impact of a globalized economy today is the ability of political and structural changes in one part of the globe to influence labor policy decisions in another part. This interconnectedness of global economies today have been put under the scanner with protectionist economic policies finding a larger in many of the developed economies of the west. And within the Indian context, no better example of how such rising favor of protectionist policies can impact sectors geographically dispersed economies has occurred in recent times. Such has been the case with the Indian IT sector. 

Over the years, the role that the Indian IT sector has begun to play has been pivotal in the country’s economic journey. Owing to budding markets in the west and availability of local talent which would often operate at a lower labor cost, companies Infosys and Wipro were able to establish themselves as market leaders, with companies like TCS and Tech Mahindra following the suit. Given the growth potential of the IT sector across developed economies like the US and the availability of cheap trained talent in India meant many companies made India their base when it came to acquiring talent tow work in US markets. Over the years, this trend has meant that India’s IT sector has today evolved into a $150-billion sector with one of the largest job-creating potentials across the organized sector. But all this today maybe under change. 

Factors driving such high attrition rates

Traditional IT sector business models hinged critically on allowing Indian talent to find positions in their overseas markets (typically US and UK) as this would provide IT companies a cost-effective talent advantage. Such hires were usually paid less than what companies would have to pay if they hired indigenously so being able to recruit Indian talent and send them to work across foreign markets soon became an industry norm, but like many aspects of a modern, globalized world, this too was to come to a halt. 

In the latest statement by Infosys, the move of tightening visa rules has had a major role to play in its hiring numbers going down while many have been forced to leave. Indian IT firms have long sought to hold on to employees by offering the prospect of a US posting but this has faced a large over the years. Infosys faced the most visa rejections in 2018 — as many as 2,042 — according to US think tank Centre for Immigration Studies. 

The Economist reported that over six Indian companies — Tata Consultancy Services, Infosys, Wipro, Cognizant, and the US arms of Tech Mahindra and HCL Tech — accounted for nearly two-thirds of the rejections among the top 30 companies, the think tank said in March after analyzing data from the US Citizenship and Immigration Services. 

A reflection of a larger rise of protectionist policies in the region, the reduction in the of H1-b visas being given to prospective employees has meant a steady fall in hiring numbers. The same has been the case with other companies like Wipro and TCS who have had major portions of their visa applications denied. Although many such companies have in response began hiring from local talent pools in foreign markets, this is yet to reduce attrition rates significantly.

The other major force reshaping the sector and by its nature, pushing attrition rates higher has been the shift towards using the latest technology. Although the nature of tech-driven transformation has been prevalent across the other sectors, IT sector being at the forefront of such advancements has usually meant swifter application. Even as a response to the rising mandate to hire locally from foreign markets and stricter visa legislation, the adoption of tech like shifting to digitalizing company operations has contributed majorly to the high attrition rates across the sector as many without the requisite skills were let go, at times unceremoniously.

In addition to these major factors, the growing number of alternatives in front of tech talent today has meant that many have over these troubling times for the IT sector have preferred to join other places. The advent of e-commerce and other tech-based startup sectors has helped many find an alternative to taking up jobs within the IT sector. Even companies like Deloitte and Accenture, in addition to fintech and companies, have become a viable option for IT sector relevant talent.  

A silver lining? 

While the regulatory environment in the US and the UK, the largest markets for Indian IT companies, remains uncertain in how its socio-political climate evolves to shape economic policies, the sector has in recent times seen signs of growth. The investments are undertaken to transform business processes—especially making them digitally driven—in addition to hosts of mergers and lucrative business deals, the sector has certainly begun showing signs of improvement. In 2018, the $160 billion industry laid off over 56,000 employees as automation and artificial intelligence and this had an overall adverse impact on the attrition rates across IT companies. 

But many are now targeted to go out looking for the right fit and are willing to curb attrition rates by improving both on the compensation front by offering attractive salaries and talent management where better retention and employee management practices are to be followed. The on ground changes of such steps are yet to be seen and future uncertainties are certainly not out of the window. But to curb attrition rates remains a major challenge for the IT sector. 

Topics: Talent Management

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