Leaving the dream: Infosys battles worker exodus

Leaving the dream: Infosys battles worker exodus
File photo of the logo of Indian software giant Infosys at their campus in Bangalore.

MUMBAI - Infosys Ltd, once a bellwether for India's US$100 billion (S$126 billion) -plus IT outsourcing industry, is losing its cachet as the employer of choice for a generation of young IT workers, with staff leaving at an unprecedented pace as the Bangalore-based company struggles to regain ground lost to rivals.

Current and former Infosys staff interviewed by Reuters say morale has been dented by a series of senior management exits and worries about career prospects as the company's revenue and pay increases grow at a slower rate than at competitors such as Tata Consultancy Services Ltd (TCS).

Annual revenue in the year to end-March rose 24.2 per cent, lagging growth of 29.9 per cent at TCS.

The annualized rate of attrition at Infosys - effectively the number of staff leaving or retiring - was a record 18.7 per cent at end-March, 2.4 percentage points higher than a year earlier. That's close to a fifth of the company's workforce of more than 160,000. The attrition rate at market leader TCS was 11.3 per cent.

India's outsourcing services industry has relied for years on an army of engineering graduates to build so-called "bench strength", key to winning new contracts in an increasingly competitive industry. A strong "bench" signals to prospective clients that the firm can assign enough technicians to new projects. That signal is weaker when the number of staff quitting a company rises to uncomfortable levels. It also does little to attract new hires in the close-knit IT world.

"We were all excited when we joined Infy," said Sandeep Chaudhary, who last month quit Infosys after two years to go and work at a rival. "It has the best training and campus, but the company fails to utilize the training it gives its employees."


Infosys announced an average 6-7 per cent pay rise last month for India-based staff, below the average 10 per cent raise at TCS. Third-ranked Wipro Ltd said it plans raises of 6-8 per cent from June.

Offering lower pay increases than its rivals could mean attrition levels at Infosys will rise further, UBS wrote in a client note last week. UBS cut its Infosys stock rating to 'Sell' from 'Buy'. "Such high levels of attrition could impact revenue acceleration," it added.

Infosys President Pravin Rao, a leading candidate to take over as CEO when S.D. Shibulal retires in January, acknowledged that attrition is higher than the 12-13 per cent rate the company is comfortable with.

Rao said Infosys is taking steps to stem the flow of those leaving: restoring regular April pay rises, having more frequent reviews for promotion, fast-tracking promotion for high achievers and increasing the fixed component in paychecks. In the past year, it has also held more 'town hall' meetings and 'jam sessions' where staff can speak informally with management.

"Yes, as a company we're seeing challenges on growth, and when growth does not happen opportunities get limited so attrition rises," Rao said in a phone interview.

He noted Infosys is hiring aggressively in sales, and expected attrition rates would return towards more acceptable levels in the coming quarters. "We're confident that once these changes start sinking in ... and growth comes back, attrition will come down," he said.

Some investors remain wary, however.

"If you lose too many people you have to redeploy them and clients don't like that. I'd say it's the biggest issue at the company right now," Bhavin Shah, CEO of investment bank Equirius Capital, said by phone from Ahmedabad, noting the high levels of attrition made him cautious on Infosys shares.

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