TCS finally sees some positive hope on the attrition front

TCS attrition situation improving

by 5paisa Research Team Last Updated: Dec 13, 2022 - 02:29 pm 25.8k Views

For a long time, we associated attrition with the smaller software companies and the large companies had managed to successfully bring it under control. Something changed in the last few months in the form of talent crunch.

As the demand for talent became more digital, the companies were doing away with people without the fit while the right people were also moving as they were getting lucrative offers. The result was a spike in attrition, which is a case of too many people leaving the organization.

In the last quarter, TCS had seen its attrition rate cross 17%, a level rarely seen in companies like TCS. Of course, Infosys was still higher, but we will not get into comparisons at this point of time. Now TCS is confident that despite the high levels of attrition, more tech talent is expected to enter the job market from start-ups.

Most start-ups are aggressively laying off staff to reduce cash burn and traditional IT may end up becoming the big beneficiary of this trend. Many of them bring a start-up culture and a lot of fresh digital talent.

As a result, TCS expects the rate of staff departures or what we call attrition, to fall and demand for its services to rise. That is likely to be triggered by companies continuing with their pandemic-hastened digitisation processes.

As the central banks withdraw stimulus, the start-ups will find it tougher to get access to big money from the PE funds and the VCs. Even if the money comes, it will come with strings attached with a clear time table for reduction in cash burn. Much of this talent is likely to flow into the Indian IT sector.

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For the March 2022 quarter, TCS saw its rate of staff attrition rise to 17.4%. Attrition here refers to the percentage of persons retiring or leaving as a share of the staff size. In the last one year, the attrition at TCS has increased from 15.1% to 17.4%.

The reason was that the India's IT services sector was experiencing a tech talent crunch and high staff turnover. The good news is that India still has a brain reserve of talent and hence attrition should gradually come down as the right pegs fit into the right slots.

The good news is that the process of digitization is almost irreversible and it is here to stay for a long time. According to TCS, it is very unlikely that the very companies which went digital during the pandemic would significantly reduce their tech budgets. That is not going to happen. There may be some dent on the margins or on the fringes but the demand scenario is still likely to be very robust for the IT companies.

There is another silent trend that is visible. Young Indians are increasingly looking at their careers beyond a full time job. They are willing to explore more ambitious and adventurous options along the way.

Also, there is a lot of allure of the stock option component that many of the start-ups offer to their key employees. That ensures that employees build a much better long term association with the company.

The IT sector was once the fountainhead for the best rewards and manpower policy. Now they are facing stiff competition for talent from the start-ups. For now, TCS is betting on the fact that a slowdown in start-ups would boost talent availability.

It may not be that simple. The start-up scene remains robust in India and has the full fledged government support. But, for now, TCS appears to be very positive about the attrition scene turning around.

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