Rising attrition and growth in demand impel firms to build up a buffer.
The bench — information technology industry jargon for staffers with no project on hand — is making a comeback. The seemingly paradoxical reason is rising attrition and growth in demand from the US, the industry’s biggest market.
A higher bench isn’t desirable from the profitability angle, but IT firms say they have to create a buffer category of staff, as no one wants a situation where projects get delayed due to sudden exits of employees.
No one expects the bench to go back to the level of 2007, before the economic slowdown struck. “Firms have seen that they can manage better. But the change is that they are looking at smarter creation of talent pools in the organisation,” said Rohan Mehta, manager, IT services, Elixir Consulting, a recruitment process outsourcing firm.
A s a result of a higher bench, the utilisation level of employees is expected to go down to around 75 per cent from the 80-82 per cent level seen in the past four quarters. “The sudden jump in attrition and a simultaneous increase in volume growth has taken many IT firms by surprise. Some of them find themselves in an unplanned situation. Infosys is an example of this. So, we will see an increase in bench or, rather, utilisation will go down a bit, as firms will need to create a buffer for the growth that is coming,” said an analyst of a leading brokerage firm.
Take Patni Computer Systems. The company missed revenue expectations in the past two quarters due to high attrition and inability to execute. “The more serious worry should be the cost of lost revenues if firms are not able to hire strongly and quickly enough to meet full client demands and also hire additionally just-in-time to offset higher attrition, while keeping buffers in store,” said Viju George and Nishit Jasani of JP Morgan Asia Pacific Equity Research, in a report.
Focused on capability building, Bangalore-based MphasiS started a ‘Talent Elevate Programme’ six months earlier. “Increasing the bench size is a reality but we have been selective when it comes to having people on bench. At MphasiS, we are creating a talent pool across specific skills, based on our reading of requirement,” said Elango R, head of the human resources department.
He explains, “Internally, we have a rolling forecast about which technology will be in demand. Since we already know about the trend, we also hire accordingly. Even if we hire a person with two years of experience, we try and train in another technology. This is applicable for both freshers and for laterals.” At present, the company is hiring people with expertise for its remote infrastructure management (RIM) business.
Wipro, India’s third largest IT services firm, that plans to hire more of laterals, is also focusing on the type of people on bench. “In the last two to three quarters, we have been hiring just-in-time and deploying people on projects. But going ahead, I think the bench is going to be important. But more than that, the bench needs to be relevant as well,” said Saurabh Govil, senior vice president and head of human resources.
At Wipro, training is an important part for employees. “Niche skills are always in short supply. We hire people with near skills and train them. The ‘Competency Framework’ that we have spreads over six years. We have mapped the training needs of all our employees and depending on the shortages, we move people accordingly,” said Sambuddha Deb, global delivery head.
“The direct impact on margins of payouts of increased wages to counter higher attrition is modest. What firms will have to monitor is whether high attrition prevents them from capitalising fully on the healthy macro-environment, which might result in loss of potential revenues,” said George of JP Morgan.
While utilisation had gone up during the past six quarters as firms struggled to absorb hiring commitments, in the last two quarters, attrition also zoomed for Indian IT firms. In the case of Infosys, the company saw 7,000 employees leaving it in the first quarter, taking its attrition to 16 per cent, one of the highest for the company in the past four quarters.
