Informist, Tuesday, May 11, 2021
By Sai Ishwarbharath and Nikita Periwal
CHENNAI/MUMBAI – Indian technology companies have seen their deal wins jumping to record highs and profitability improving even as businesses across the world struggled to keep afloat amid the COVID-19 pandemic.
But the raging second wave of the pandemic is hitting these companies hard as their employees find themselves swamped with this humanitarian crisis. India has among the largest number of technology professionals in the world and is one of the most preferred outsourcing destinations because of its cost-effectiveness.
The first wave of COVID-19 saw Indian technology companies deal with technological and infrastructural challenges. While companies managed to iron these out over a year with strong processes in place, they are now faced with productivity losses.
"Business challenges are centered around striking a balance between employee health/morale and productivity," Axis Capital said in a report today.
The problem is especially acute as the increasing number of workforce being impacted is coming alongside a continued rise in demand. Technology companies get about four-fifths of the revenues from outside India, where clients are moving back to normalcy, and are prioritising spending on technology as they look to make their businesses more resilient.
Centres in key cities in the country -- Bengaluru, Pune and Delhi -- together account for around 70% of delivery employees, and all of these have been badly hit by the pandemic, Axis Capital said.
"It's a challenging environment, of course, and it's a stressful and emotional time for our associates and their families," US-based Cognizant recently said. More than 70% of the company's near 300,000-employee base is based in India.
A jump in attrition is compounding the trouble for technology companies as the industry lacks enough skilled labour, especially for digital capabilities.
Retaining employees, ensuring a seamless delivery of services amid lockdowns, and surviving in the war for digital talent will, thus, determine how companies fare in the near term.
The war for digital talent become visible as Wipro said it will 'aggressively' invest in its talent base in the form of promotions and incentives to retain employees.
India's largest technology services company Tata Consultancy Services announced wage hikes for the financial year 2021-22 (Apr-Mar) from April—its second within six months. Infosys announced hikes effective July.
The net hiring by top technology companies in India this year could be the highest in many years, coming at a time of strong demand and higher proportion of work being done offshore, JM Financial Institutional Securities said in a recent report.
Even as Indian companies are prepping themselves to deal with attrition, Cognizant has acknowledged it.
"...revenue upside was limited by elevated attrition, reflecting the intensely competitive market for digital talent...this put some pressure on salaries as rows were filled by lateral hires or contingent workforce," the company said last week.
It also had to let go of businesses worth around 100 basis points because of the lack of requisite talent. It recorded a 21% attrition rate for Jan-Mar, the highest in the industry.
Talent will be a 'key differentiator' for companies and the war for acquiring and retaining next-generation talent will aggravate in the future, industry body National Association of Software and Services Companies' said in a recent report.
The increased demand for people with digital skills comes as the overall share of digital businesses are taking a larger share in companies' overall revenue pie. Cognizant's digital business, for instance, shot up to 44% in Jan-Mar from 39% in the year-ago period.
The growth has been backed by sustained digital transformation in sectors like retail that are desperately trying to shift online.
At a time like this, Tata Consultancy Services' early investments in training its people in digital skills and record low attrition are set to help it outperform peers.
The Tata group company has over 379,000 people trained in digital skills, of its total workforce of 488,649 people. Attrition in the company was also at a record low of 7.2%, one of the lowest in the industry.
The combined impact of the COVID-19 in India and the jump in attrition are not expected to last long, but will weigh on the seasonally strong June quarter. Over the medium-term, long-standing relationships with clients, some onsite centres and strong hiring are expected to help companies overcome this, analysts said. End
US$1 = 73.36 rupees
Edited by Akul Nishant Akhoury
Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2021. All rights reserved.
