Involuntary Attrition in Indian Information Technology Firms (A)

Abstract

Umang kept the copy of Times of India (TOI) down with a worry in his mind. He came to Bangalore in 2001 as an entry-level engineer in a multinational software firm and has remained with the same company, rising through the ranks to become a project manager. He was an expert in COBOL (for Mainframes), which had high demand when he joined the firm. Since the last couple of years, though, he has been noticing that with the advent of new technologies, customers were shifting their preference to newer applications that were more modular, less cumbersome and more easily configurable. COBOL-based applications were cumbersome but have been reliable till now. Of late, he also felt that the firm was paying more attention to engineers with newer skills such as cloud technologies, big data analytics, etc. and people like him were politely refused promotions and often kept away from new development focused projects. For the past 18 months, he has been working on a support project.

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Resources

Exhibit 1: Indian Information Technology Industry: Revenue Growth

Exhibit 2: Net Staff Growth: Big Four

Exhibit 3: Expected Growth in Worldwide Spending on IT Outsourcing

Appendix A: Competitive Situation and the outsourcing business model 1 , 2 , 3

The genesis of Indian outsourcing industry was in the model of labor arbitrage. Cheap manpower and time zone differences along with improved communication infrastructure brought Indian software development capabilities to the forefront. TCS was the pioneer in propagating the IT outsourcing model and many new players joined in the coming years with prominent among them being Infosys, Wipro, Patni ( now Igate Patni), Satyam ( now Mahindra Satyam), Tech Mahindra, Mind Tree, etc. As the competition heated up, the industry became more isomorphic, and there were not many factors that differentiated among the various players except the cost at which the services were offered and their past precedence of delivering on time. Companies tried to separate themselves by entering new spaces such as business process outsourcing and going up the value chain by providing business consulting services.

Changing Landscape

Increase in technological intensity across verticals, and the emergence of new technologies gives the Indian IT firms much headroom for future growth (Refer to Exhibit 3). Indian IT companies have recognized that the current technological products have a shorter shelf life leading to regular churn in orders, and also the customers need to keep their information technology costs variable. With time, the global outsourcing industry has become mainstream and has become a durable component of every company’s strategy. To continuously grow, all the main Indian IT players have positioned their strategy on five pillars:

  • Key Account Focus: Building transformation partnership with customers that are beyond the traditional outsourcing model. The foundation of such partnership is a long-term commitment that exhibits maturity and technological leadership.
  • Integrated Full Services: Providing greater value to the customer by being a one-stop shop for all services for seamless delivery.
  • A network of onshore delivery canters across the world: Be near to the client and provide global support to global customers.
  • Strategic Acquisitions: Acquire technological and domain depth through strategic acquisitions and building capabilities in new markets.
  • Non-Linear Business Models: Build portfolio of nonlinear revenue generators to reduce dependency on manpower based revenue generating models.

Indian firms have also strived to increase the portfolio of fixed price projects, where the clients do not care about the number of employees working on the project but are only concerned with the results. This increase in fixed priced projects has led to a decrease in body based billing engagements making the revenue model flexible with respect to headcount.

Appendix B: Salient point of petition filed by an employee of Indian IT firm in Madras High Court 4

The petitioner is a 'workman' within the meaning of Section 2(s) of the Industrial Disputes Act, 1947, as her main duties are “technical and clerical in nature”.

  • Her job’s primary requirement were “receiving and collating information about software/application to be developed, analyzing requirements and designing and developing appropriate software or application based on client company’s needs”.
  • She was an honest, sincere and dedicated worker. Her performance appraisal rating has always been “meets expectations” during her service in the organization.
  • She apprised the court that she was issued termination orders on December 22, 2014, advising her that she would be relieved from service on January 21, 2015.
  • According to Section 25 of the Industrial Disputes Act, the principle is “last come, first go”.
  • The organization has not published any seniority list as required under the rules framed under the Act, and it has not given any notice of retrenchment as required under the Act.
  • The company also does not propose to pay 15 days of wages for every completed year of service as compensation that too is mandatory under the Act.
  • She concluded that “in any event, termination is not valid or justifiable.”
Salient point of the organisation’s response to the court
  • The petitioner has stated in the affidavit that she is pregnant. This fact was not made known to the organisation by the petitioner during the exit process.
  • Considering this statement made by her in the affidavit before the court, while disputing that the employees are workmen within the Industrial Disputes Act, the organisation has decided to revoke the letter relieving the petitioner, as an exceptional case, in line with its practice of not relieving any employees during pregnancy.

Madras High Court Judgement: Madras high court noted that on revoking of the termination order by the firm, the writ petition is dismissed as infructuous.

Appendix C: Experiences shared by employees from different IT organisations who faced involuntary attrition (Names are changed to protect identity)

  • Satish (Experience: Eight years): The HR managers were hard on people like me who were in between projects. We had to give continuous examinations to prove our worth. The passing percentage was kept very high. After clearing two exams in as many months, I was not able to clear the third exam. My HR manager suggested that I should put in my papers voluntarily and hunt for a job during the notice period, or the company may tag me as an underperformer and ask me to leave forcibly. I came under pressure and resigned. It has been four months, and I am still looking for a suitable opportunity.
  • Vijay (Experience: Eleven years): I had returned from an onsite project seven months back. I have been working as a team member for quite some time at onsite and now wanted to take senior roles. The HR team was not able to meet my expectation for seven months. One fine day they called me and said that “we do not have any role and responsibility that is right for your experience and also we find that your appraisals have been stagnant for the last four years. There is one “below expectation” rating as well.” At onsite we were never worried about annual appraisals as everyone got similar salary irrespective of the appraisal rating. The ratings usually affected promotions only and our manager used to give an appropriate rating to the person who was due for a promotion so as to get him promoted. I was asked to leave by the end of the month.
  • Sarita (Experience: Seven years): I was not getting a suitable project since I returned from maternity leave. Though I got a ‘meet expectations’ appraisal rating, my inability to change location and being on the bench for around five months went against me. I was given multiple opportunities to get absorbed in projects, but the project leaders did not select me sighting one shortcoming or the other in skill set. Before the firm could throw me out, I resigned and am looking after my child now.

Notes

1. Tata Consultancy Services. (2015). 2014-2015 annual report of Tata consultancy Services limited. Retrieved August 15 2015, http://www.tcs.com/investors/Documents/Annual%20Reports/TCS_Annual_Report_2014-2015.pdf

2. Infosys. (2015). 2014-2015 annual report of Infosys limited. Retrieved August 15 2015, http://www.infosys.com/investors/reports-filings/annual-report/annual/Documents/infosys-AR-15.pdf

3. Wipro. (2015). 2014-2015 annual report of Wipro limited. Retrieved August 15 2015, http://www.wipro.com/documents/investors/pdf-files/Wipro-annual-report-2014-15.pdf

4. Subramani, A. (2015, January 13). Madras high court stays termination of TCS employee. Retrieved February 03 2015, http://timesofindia.indiatimes.com/city/chennai/Madras-high-court-stays-termination-of-TCS-employee/articleshow/45870194.cms

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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