InvestorQ : Do the IT companies see their attrition rates going down in the coming quarters?
Lavanya Subramanian made post

Do the IT companies see their attrition rates going down in the coming quarters?

Anamika Sodhani answered.
1 month ago

The pace at which IT companies lose their employees, better known as attrition, has emerged as the biggest problem in the last few quarters. Even the large IT companies like Infosys have seen their attrition rates touch record highs of 27%. A company like TCS, that has traditionally kept attrition in single digits, has seen attrition soar to 22% and even the likes of Wipro and HCL Tech are seeing attrition in the range of 23% to 24%. The big reason for this attrition has been the sudden mismatch between demand and supply. That has made skilled IT professionals in great demand as poaching has become rampant.

It all started as part of the post-COVID recovery. The Indian IT sector saw a surge in demand for IT services as companies looked to leveraging the power of IT for cost cutting and business enhancement needs. There was a substantive shift to digital and cloud, so the demand for specific skill sets was far in excess of supply. This led to higher packages offered, rampant poaching and massive attrition. Another trend was the shift to start-ups which were better paying and also challenged the IT professionals a lot more than the routine IT outsourcing jobs. All these amplified the attrition in the IT sector.

So, what has changed so suddenly? In fact a number of things have changed. For instance, there is sanity returning to start-ups which are not as attractive as 2-3 years back as PE funds are slowing down their check writing. But, the real big reason for the fall in attrition levels could be the recession fears globally. The priority for IT professionals now is to just hold on to their existing jobs. That kind of job security is only available in the larger IT companies and not so much in smaller IT companies or in volatile start-ups. These factors are likely to reduce the attrition problem for Indian IT.

The influx of freshers will also reduce the attrition. Last year, big IT companies onboarded more than one lakh freshers. They will be more inclined to stay on in the ecosystem rather than jump ship at the first opportunity. This will also reduce attrition in coming quarters. IT companies have also created a demand crunch by being wary of fresh additions amidst recession fears in the US, EU and UK. Also, IT service companies are going slow as they fear loss of business to IT consultants like Accenture and Deloitte. Hence the demand for traditional roles may reduce and consulting demand may expand.