India's
$146-billion information technology (IT) industry is consistently
hemorrhaging more people than ever before, even as the sector and large
companies such as Tata Consultancy Services (TCS) and Infosys achieve
greater size and scale with each passing year.
Over the last four quarters, India's largest software exporters TCS, Wipro and Infosys combined have lost roughly over 100,000 people between them, ET's analysis shows.
Gross addition for the three combined stood at roughly 150,000, while net addition was between 40,000 to 50,000.
According to at least two CEOs of India's top 10 outsourcing firms, metrics like gross addition of employees are becoming increasingly irrelevant and companies are also strategically starting to manage attrition, amid the advent of automation and emergence of newer technologies such as cloud computing.
Increased attrition rates of 19%-20% are starting to become the new normal for companies —a far cry from the days when companies like Infosys used to enjoy higher growth rates and lower levels of attrition.
Infosys' attrition rate, for example, was 22.3% on a consolidated basis and 18.9% on a standalone basis for the year ended March, significantly more than its attrition rate of 13.4% five years ago, in FY10. In the latest quarter ended June, Infosys lost 8,553 employees, with a net addition of 3,336 employees.
For TCS, attrition number was nearly double that of Infosys, losing nearly 15,000 people during the quarter, with a net addition of roughly 5,279 employees.
Bangalore-based Wipro saw about 12,500 people leaving, even as it reported net addition of a little over 3,000 employees.
This is a far cry from much of the 2000s when companies used to add over tens of thousands of engineers every year, while losing a lot lesser number of people.
At the core of this sea change is automation and the advent of newer technologies such as cloud computing, and improved productivity.
N Chandrasekaran, CEO at TCS, in a keynote speech at the Morgan Stanley Annual India Summit last month had said, "In FY10, we had a revenue of $6.3 billion with a headcount of 160,000. In FY15, we doubled the headcount to 320,000. But the revenue did not just double. We generated revenues of $15.5 billion, representing a productivity gain of nearly $3 billion."
Companies like Infosys are moving fast on automation to ensure differentiation at a time when the technology industry and business models are undergoing rapid changes at the very core and large technology customers such as Citigroup are asking for lesser number of people on each project.
"We rolled out the Infosys Automation Platform within infrastructure management service to the first 10 clients and we saw productivity improvement of up to 37% and people savings of up to 17% in those cases," Infosys CEO Vishal Sikka said during an investor call last week.
"This gives us a significant hope for bringing in automation as a value driver and amplification of our capability so that we can do more projects with less number of people, so that we can bring differentiation to our projects as well as address the margin," he said.
Wipro is also following a similar strategy, with its in house AI-powered automation platform Holmes. "Holmes has got 70 engagements last quarter. If you look at current headcounts in infrastructure and ADM businesses, we have taken out (and redeployed) close to around 1,000 people from current jobs by using these platforms," Wipro chief executive TK Kurien told ET in an interview last week.
During the year ended March 2015, the Indian IT industry hired 14,350 engineers for each billion dollars in revenues, according to Nasscom data. In 2003, that figure was nearly thrice as much at close to 38,000.
Experts such as Viju George of JP Morgan said employees were also switching companies, based on career prospects and the performance of their respective firms.
"While, the industry as a whole is still measured in recruiting and adding to headcount, employees' concerns about the firms' growth and personal career advancement is leading to them switching firms (eg folks leaving Infosys for Wipro and vice-versa, even as these two companies are yet to shake off the growth shackles). 'The grass is greener on the other side' mind set is perhaps leading to employee swapping between firms," George said in a note earlier this month.
The breakneck expansion into digital technologies is not coming cheap. Indian IT firms, despite their focus on training, do not yet command a workforce to service digital contracts, and a tighter distribution of visas also raises the need to hire short-term consultants onsite.
Digital contracts typically require a higher proportion of onsite workers, at least initially. Fees paid to external consultants rose to $290 million, or 7% of total revenues, up from $242 million a year ago at TCS. It also touched an-all time high at Infosys at about 5% of total revenue.
Over the last four quarters, India's largest software exporters TCS, Wipro and Infosys combined have lost roughly over 100,000 people between them, ET's analysis shows.
Gross addition for the three combined stood at roughly 150,000, while net addition was between 40,000 to 50,000.
According to at least two CEOs of India's top 10 outsourcing firms, metrics like gross addition of employees are becoming increasingly irrelevant and companies are also strategically starting to manage attrition, amid the advent of automation and emergence of newer technologies such as cloud computing.
Increased attrition rates of 19%-20% are starting to become the new normal for companies —a far cry from the days when companies like Infosys used to enjoy higher growth rates and lower levels of attrition.
Infosys' attrition rate, for example, was 22.3% on a consolidated basis and 18.9% on a standalone basis for the year ended March, significantly more than its attrition rate of 13.4% five years ago, in FY10. In the latest quarter ended June, Infosys lost 8,553 employees, with a net addition of 3,336 employees.
For TCS, attrition number was nearly double that of Infosys, losing nearly 15,000 people during the quarter, with a net addition of roughly 5,279 employees.
Bangalore-based Wipro saw about 12,500 people leaving, even as it reported net addition of a little over 3,000 employees.
This is a far cry from much of the 2000s when companies used to add over tens of thousands of engineers every year, while losing a lot lesser number of people.
At the core of this sea change is automation and the advent of newer technologies such as cloud computing, and improved productivity.
N Chandrasekaran, CEO at TCS, in a keynote speech at the Morgan Stanley Annual India Summit last month had said, "In FY10, we had a revenue of $6.3 billion with a headcount of 160,000. In FY15, we doubled the headcount to 320,000. But the revenue did not just double. We generated revenues of $15.5 billion, representing a productivity gain of nearly $3 billion."
Companies like Infosys are moving fast on automation to ensure differentiation at a time when the technology industry and business models are undergoing rapid changes at the very core and large technology customers such as Citigroup are asking for lesser number of people on each project.
"We rolled out the Infosys Automation Platform within infrastructure management service to the first 10 clients and we saw productivity improvement of up to 37% and people savings of up to 17% in those cases," Infosys CEO Vishal Sikka said during an investor call last week.
"This gives us a significant hope for bringing in automation as a value driver and amplification of our capability so that we can do more projects with less number of people, so that we can bring differentiation to our projects as well as address the margin," he said.
Wipro is also following a similar strategy, with its in house AI-powered automation platform Holmes. "Holmes has got 70 engagements last quarter. If you look at current headcounts in infrastructure and ADM businesses, we have taken out (and redeployed) close to around 1,000 people from current jobs by using these platforms," Wipro chief executive TK Kurien told ET in an interview last week.
During the year ended March 2015, the Indian IT industry hired 14,350 engineers for each billion dollars in revenues, according to Nasscom data. In 2003, that figure was nearly thrice as much at close to 38,000.
Experts such as Viju George of JP Morgan said employees were also switching companies, based on career prospects and the performance of their respective firms.
"While, the industry as a whole is still measured in recruiting and adding to headcount, employees' concerns about the firms' growth and personal career advancement is leading to them switching firms (eg folks leaving Infosys for Wipro and vice-versa, even as these two companies are yet to shake off the growth shackles). 'The grass is greener on the other side' mind set is perhaps leading to employee swapping between firms," George said in a note earlier this month.
The breakneck expansion into digital technologies is not coming cheap. Indian IT firms, despite their focus on training, do not yet command a workforce to service digital contracts, and a tighter distribution of visas also raises the need to hire short-term consultants onsite.
Digital contracts typically require a higher proportion of onsite workers, at least initially. Fees paid to external consultants rose to $290 million, or 7% of total revenues, up from $242 million a year ago at TCS. It also touched an-all time high at Infosys at about 5% of total revenue.
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