Talent crunch may hit Indian IT hard

- Hiring engineers has been difficult due to attrition issues

- Wage cost has also gone up

- Clients with small projects staying away from India

- Large clients have the financial muscle to hire in big numbers

- This is more than the earlier projection of

- Top-4 IT companies planning to hire

If the talent shortage is not addressed, it can impact India's image as the favourite outsourcing destination, says Pareekh Jain, an IT outsourcing advisor & founder of Pareekh Consulting

Bengaluru: India may lose out as a favourite offshoring destination for IT services among small and mid-sized customers if the talent scarcity and rising wage cost persist in the Indian IT industry.

According to sources in the know, clients who want to execute small projects with utilization of limited number of engineers are staying away from India due to the ongoing talent shortage seen in the industry. Though it is not a big phenomenon yet, if the talent issue is not addressed in a short period, India may lose sheen as a favourite technology outsourcing destination in coming years.

"The perception that attrition is a problem here is building up among some clients. If the talent shortage is not addressed, it can impact India's image as the favourite outsourcing destination. The strength of India is that nowhere in the world, you get talent at scale. So, this perception of talent shortage should be addressed soon," said Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting.

During the second quarter ended September, IT services players across the board have reported rising employee attrition. Infosys saw its attrition rising by 620 basis points over the first quarter to 20.1 per cent in the September quarter. While Wipro's attrition rate reached 20.5 per cent in

Q2 of FY22, up from 15.5 per cent in Q1; for HCL Technologies, attrition rate touched an all-time high rate of 15.7 per cent, up from 11.8 per cent reported in the first quarter.

Market leader Tata Consultancy Services had the lowest attrition in the industry, which came at 11.9 per cent in Q2 from 8.6 per cent reported in the first quarter.

"While large clients have the financial muscle to hire in big numbers, small clients are staying away from India in recent months as hiring engineers has been difficult due to attrition issues. Wage cost has also gone up," said an industry source. He, however, added that this is limited to a few clients in recent months and not large enough phenomena yet.

Meanwhile, IT firms are adding fresh engineering graduates in large numbers to tide over the attrition problem. The top four IT services companies are planning to hire around 160,000 graduates from campuses this fiscal year. This is more than the earlier projection of around 120,000 for FY22.

Management of large IT firms have indicated that the supply-side problem is expected to ease in next two-three quarters.