Infosys wrestles with India IT worker turnover

Infosys wrestles with India IT worker turnover

Summary: The Indian outsourcing firm is wrestling with a 25 percent spike in employee attrition---the highest mark since 2004, analysts say.


Infosys' first quarter results were in line with expectations for the most part and the outlook also looks solid. However, the Indian outsourcing firm is wrestling with a 25 percent spike in employee attrition---the highest mark since 2004, analysts say.

The turnover figures are always worth tracking for Indian outsourcing firms. These companies are moving upstream to more "transformational" deals including business process outsourcing and consulting. Meanwhile, these companies are in growth mode and a high attrition rate becomes a bit of a distraction.

First, the numbers. Infosys reported fiscal first quarter earnings of 57 cents a share on revenue of $1.36 billion. Wall Street was looking for earnings of 56 cents a share on revenue of $1.4 billion. The company said its second quarter revenue will be $1.41 billion to $1.43 billion with earnings of 59 cents to 60 cents a share. Wall Street estimates: earnings of 60 cents a share on revenue of $1.38 billion.

Overall, Infosys' quarter looked good. Executives were a bit cautious about Europe, but noted they weren't seeing any major hiccups. The company, however, underestimated the surge in India's economy and competition for workers.

Those stats tell the tale. Infosys raised wages and incentives and hired 8,859 workers in the June quarter. The rub: The company added a net 1,000 workers. This equation can be worrisome. Infosys has to bring on new workers and train them. Bottom line: These workers aren't productive out of the gate and hurt profit margins. For customers, there are also worries about project continuity---especially for these high-end projects. In the fiscal second quarter, Infosys is planning to hire 14,000 employees.

T.V. Mohandas Pai, director of HR at Infosys, said the first quarter turnover rate is coming back down. About 950 employees left for higher education. However, the rate of attrition for BPO employees is about 35 percent.

Pai added:

You are seeing the result of suppressed demand both sides of the equation, suppressed demand because people did not hire in the last two years. They shut their bench and when demand came back they had to madly scramble for work, for people. And on other side, many people for the last two years did not take jobs. So I think it's the perfect storm where we've had a higher attrition. But that attrition has tapered off. In June it's come down. You have to take all the factors. And in June the impact of the salary hike is being felt.

The company now projects it will hire 36,000 employees in the fiscal year, up from its previous target of 30,000, to account for attrition and growth.

Related: 3G in India to be a privilege for the rich

Topics: Banking, CXO, Enterprise Software, Outsourcing, IT Employment

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  • Maybe they should outsource to the US

    With the number of US high tech workers out of jobs, maybe this Indian firm should outsource some of the work the to the US, where they will find workers tend to stay longer. Better yet, maybe some of the US firms who are outsourcing to India might want to just hire people locally.

    • It's all about cost...

      @fromthehip - unfortunately it's all about cost. My company currently pays about $22 per hour per offshore (Indian) head with significant tax advantages.

      Not sure if many outsourced IT workers in the US would take that deal considering there would be significant tax implications for the companies and they would want even lower per hour costs, probably driving down the yearly salary into the $30K range.

      Welcome to what globalization has given us - the decimation of the middle class and if you want a non-service job be prepared to live 3 or 4 families in one apartment.
      • RE: Infosys wrestles with India IT worker turnover

        @bostonbob,<br>I think that's overstating things a bit. The demand for IT workers in the US is still pretty healthy when compared to other occupations. I think what we are seeing is economics at work here. The Indian IT labor market to set to experience an increase in salaries which will narrow the cost advantage. Corporations will move to the next country with a IT labor market that will provide a cost advantage.<br><br>The US government should however change their tax policies so, at there very least, they don't encourage offshoring. It was an Obama campaign promise. Given the current employment rate, it's disappointing that there hasn't been any movement in this area.
  • RE: Infosys wrestles with India IT worker turnover

    You would think companies would stop outsourcing to other parts of the world and invest in there own countries and outsource to those in this country instead so there wouldnt be so many out of work as there is and just maybe, the economy would turn around for the better.

    Everybody is always hyp-ing about not buying foreign fuels, how about not buying into foreign IT services too!
    • RE: You would think companies would stop outsourcing


      You fail to understand the economics involved.

      Companies do not give a damn about the health of the country; all they care about is the bottom line. If we can make more money for our stockholders, then the country be dammed. As long as tax codes DO NOT penalize companies for offshoring, they will continue to offshore. Companies, and their bonus seeking executives don't give a damn about the `little guy`.

      If the thought of getting Washington to change that policy has entered your mind; forget it. Congress has been bought and paid for by the corporations.
      • RE: Infosys wrestles with India IT worker turnover


        Little guy? Most big companies were created by a little guy who wanted better. Generally, companies operate to their best advantage. If they run themselves like a government or stick to a social agenda, they'll get run over.

        Greed, for the lack of a better word, is good. Just ask the USSR or see how China's been run the last 15 years.

        So let's impose massive government rules on companies and all your little guys will suddenly lose their jobs because companies won't be able to benefit from greed, no one will lend them money and the economy just goes down the tubes.

        People are having huge problems with high unemployment and slow GDP growth. Imagine if the economy was shrinking 2% to 5% per year.
  • RE: Infosys wrestles with India IT worker turnover

    Rising wages in India and China is good news.