Indian IT firms see moderate increase in attrition amid GCC growth

Employee attrition is always a major concern for Indian information technology (IT) service providers. After a decline in attrition in FY24, all four top IT companies – Tata Consultancy Services, Infosys, Wipro and HCL Technologies – saw a moderate increase in FY25 as the rise of Global Capability Centres (GCCs) in India is putting pressure on them in retaining talent. Experts feel that attrition could also be under pressure this fiscal

The GCCs are also better pay masters with 15 per cent to 20 per cent higher than IT companies. They attract talent from IT companies especially those with less than five years’ experience. There are nearly 1,900 GCCs in India with around 150 coming up in the last 30 months. To offset the rise in attrition, IT companies have to hire more freshers this year, said sources.

Jayesh Sanghrajka, CFO, Infosys, told analysts that attrition is across multiple factors and multiple opportunities that people get outside. It could be GCCs, it could be competition, or it could be employees going for further studies. There are multiple of those factors that play out there.

“It’s time to make peace with the context that IT Services companies will not hire lakhs of freshers every year, nor add headcounts exponentially,” Kamal Karanth, CoFounder of Xpheno, a Bengaluru-based specialist staffing company.

Though GCC​s have added 60,000 and 1.1 lakh net FTE​s in the last two years, respectively, that number would be directly proportional to the number of greenfield GCC​s coming to India. The 12-15 per cent attrition rate with GCC​s and IT Services, and their complete replacements, suggests two things – the AI-related efficiency is yet to kick in, and if there is a need for redundancy​ in the future, enterprises can stop replacing these headcounts to avoid any forced trimming and bad PR, he said.

Yugal Joshi, Partner, Everest Group, said, yes, there is a concern among IT players on attrition. The post-pandemic employee market became an employer market in the recent past. “I foresee this to continue. Jobs are generally drying up across IT services. Though the rise of GCCs can increase attrition, typically employees are concerned about job security and therefore, may not want to leave their employers. However, due to business challenges, IT firms may proactively drive headcount reduction,” he said.

According to Ramkumar Ramamoorthy, Partner at Catalincs, a Chennai-based technology growth advisory firm, because of structural changes in the technology industry, larger IT companies are seeing an elongated period of anemic revenue growth, tepid headcount growth, lower wage hikes and limited promotions, among others. All this is reflected in volatile, and at times, higher employee attrition.

The IT industry is architected for growth and unless organic revenue growth comes back for the larger companies, mid-sized and smaller companies, GCCs and end-user IT departments of enterprises are better placed to attract and retain both experienced and fresh talent, given their stronger growth fuelled by digital technologies, he said. The Hindu BusinessLine