|
|
| Home - Industry Article - Jan 05 Issue |
A Look At Global Sourcing In 2005
continued... page 2 |
Managing Attrition
Elevated attrition, a perennial problem in the call center industry, also affects IT service providers. Wipro and Satyam both reported an attrition rate of 18% in September 2004, while HCL Technologies proved itself better equipped to control employee turnover with a rate of 13% during the same period. Reluctant to institute across-the-board raises to keep employees but unwilling to lose hard-won, top performers, companies are coming up with new ways to combat an old problem.
Some of the methods IT service providers are employing to keep valued workers satisfied include providing performance-based cash incentives and stock options, creating a clear career path, subsidizing higher education, and even offering housing facilities.
Frequently these benefits are not attractive enough to discourage employees from signing up with competing firms. So recruiting, retaining, and training employees is essential, and employee engagement is not far behind. Keeping employees engaged and satisfied is becoming a huge issue in offshore markets. Table 1 looks at how several of the big IT service providers have handled the problem of attrition.
| IT Service Provider |
Attrition Rate as of September 30, 2004 |
Staff |
Net Quarterly Addition |
Measures Taken to Combat Attrition |
| Wipro |
18% |
37,063 employees: 24,050 in IT services and 13,013 in IT-enabled services |
5,546 employees: 3,282 in IT services and 2,264 in IT-enabled services |
Issued restricted stock units to key employees |
| Infosys |
10.8% |
32,489 employees: 29,800 with Infosys Technology and 2,689 with Progeon |
5,010 employees: 4,547 for Infosys Technologies and 420 for Progeon |
Revises compensation on ongoing basis; gave employees special one-time bonus when it surpassed $1 billion in revenues; widespread employee stock ownership |
| HCL Technologies |
13.1% |
18,474 employees: 13,088 with software services, 1,172 with infrastructure services, and 4,214 in BPO |
2,116 employees: 1,582 in software services, 128 with infrastructure services and 406 in BPO |
Modified salary structures to increase proportion of performance-based pay |
| Satyam Computer Services |
18% |
16,872 employees: 15,852 technical and 1,020 others |
1,241 employees: 1,218 technical and 23 others |
Increased employee remuneration packages by 18%–20%, bringing them in line with industry standards (the third time in the past 12 months) |
Whatever the reasons, the dual problems of attrition and employee satisfaction are real and show no signs of abating in the near future. The service providers that understand how to manage these two issues will distance themselves from the rest. As Vivek Paul, vice chairman of Wipro, stated during the company’s second-quarter 2005 conference call: “We got to make sure that our attrition does not hurt of [sic] customer delivery. We are scaling rapidly. We are adding many more people…how do we make sure that does not dilute our quality systems, does not dilute our culture, and…that a war for talent does not affect our fundamental strength in the operating margin line.”
What does this mean? The competition for good offshore executives is going to be more intense than ever. In addition, senior management will devote more time in 2005 to overcoming talent attrition and rising compensation problems. The service providers and captive centers that understand how to manage these two issues will distance themselves from the rest and capitalize on the business opportunities that global sourcing presents.
The management challenges of globally sourced projects are sizeable, but steady demand from U.S. and U.K. companies and increased interest from businesses located in other regions will ensure that the practice of sending R&D and software product engineering work to lower-cost locations continues.
Marcia Robinson is the president of E-Business Strategies, a technology research and strategy consulting company. She co-authored the bestseller e-Business 2.0: Roadmap for Success, M-Business: The Race to Mobility, Services Blueprint: Roadmap for Execution, and, most recently, Offshore Outsourcing: Business Models, ROI and Best Practices. Marcia can be reached for article feedback at: marcia@ebstrategy.com
Ravi Kalakota, Ph.D., is the CEO of E-Business Strategies. A sought-after speaker and consultant on business technology trends and strategy, he has written eight pioneering books on e-commerce, e-business, m-business, e-services, and now offshore outsourcing. Ravi can be reached for article feedback at: ravi@ebstrategy.com
 
|
|
|
