Can IT Sector Tackle the Dual Problem of Attrition And Skills Gap?

IT major Cognizant has raised its revenue growth guidance into double digits due to strong demand for its services, but attrition remains a key concern for the US-based company that has over two thirds of its employees in India.

The company’s revenue of $4.6 billion grew 14.6% year-on-year in the second quarter, its best quarterly revenue so far, Cognizant CEO Brian Humphries said while sharing the company’s Q2 2021 financial results. But the company reported an attrition rate of 31% in the second quarter, the highest among IT services companies in the quarter ending June 30.

While Cognizant’s attrition rate is higher than the industry average, for the quarter ended June, TCS’s attrition rate stood at 8.6%, Infosys was at 13.9%, Wipro at 15.5% and HCL Tech’s attrition stood at 11.8%. Accenture had reported 17% attrition in the March to May quarter.

Attrition a key concern in IT sector

IT industry body Nasscom stated in a report published in June that the sector remained a net hirer of skilled talent, where the top 5 Indian IT companies have planned to loop in additional 96,000 employees during the year 2021-22, indicating the IT job market is witnessing a boom time. This very trend is also leading to high attrition with industry analysts anticipating a 22-23% attrition rate in 2021, which works out to one million resignations on a projected base of 4.6 million IT employees. Between January and March, 5-8% of full-time employees who were onboarded left within the first 90 days as per an ET report.

Prasad Rajappan, Founder of ZingHR sees that companies are building new business models to thrive in the pandemic times. These new models have led to an increase in the demand for specialists in artificial intelligence, machine learning, cloud computing, big data and automation to work on various projects. The industry has seen an almost 30-35 percent growth in the recruitment of these skills this year.

For example, Infosys has unveiled a new set of Enterprise Agile DevOps capabilities that will help businesses strengthen customer centricity and innovation. According to the IT services major, the product-centric value delivery model and the data-centric live engineering approach that helps enterprises drive business value faster while being secure by design. As Ravi Kumar S, President, Infosys explains that forward thinking firms are now evolving to a product centric operating model to ingrain customer centricity, business agility and innovation in the fabric of their organizations.

So needless to say that high attrition rates points to the maturing of Indian IT industry. Earlier, Infosys Chief Operating Officer Pravin Rao said the high attrition reflects the strong demand environment. IT companies have seen improved bottom lines since the December quarter as workforces have shifted online, he added.

The job market is exploding with new companies and startups willing to pay competitive packages. Smaller companies are in the market for the best talents. The industry is warming up to a blended work model. 70% of the survey respondents expect to have higher prevalence of remote work along with boost in gig workforce in 2021.

A Crisil report last month also sees the $100 billion IT services sector is staging a strong recovery this fiscal, with revenue growth of 10-11%. The improvement will ride on accelerating digital transformation services, as the analyst firm sees that forward-looking IT companies are ramping up their digital capabilities to keep up with the times.

Persisting skills gap to be addressed

The problem however is although the workforce is catching up in terms of skills, it is still falling short of bridging the supply demand gap. A new IDC report finds AI/ML to be the most critical technology skill that Indian organizations plan to acquire in the next six months – but how they can reduce the AI skills gap is indeed a million-dollar question.

“About 76% of respondents stated that lack of skill sets in employees’ impacts customer experience or customer satisfaction and profit growth,” says Rishu Sharma, Associate Research Director, Cloud and AI at IDC India. For example, the study found that about 74% of the enterprises stated that lack of skill impedes overall innovation. According to the study, about 30% of organizations plan to focus on AI/ML as the key areas to hire or reskill their workforce in the next six months and about 50% of respondents find it significantly difficult to develop softer, non-technical skills in the next six months.

And it is not just AI skills that are a challenge for companies. In fact a recent Nasscom study points to the fact that India’s IT sector is facing a talent crunch for niche digital skills despite the demand for digital transformation deals are rising in the post-covid era. IT firms are witnessing a 30% growth in digital deals, an 80% jump in cloud spending and a 15% rise in customer experience spending since the coronavirus outbreak, according to the IT industry’s apex body.

An ISACA study done in partnership with HCL Technologies said in its India findings that nearly 50% of the companies surveyed have unfilled positions in the domain of cybersecurity, with 46% of respondents indicating that their cybersecurity teams are understaffed and another 53% saying their cybersecurity applicants are not well qualified.

Whether it is AI, analytics, cybersecurity or any advanced technology capabilities, the key priority for IT companies is to immediately address the skills gap, which in turn can address the attrition issue to a large extent. Upskilling and reskilling workforce is definitely the answer to this crisis, coupled with high perks and a strong leadership. In the current scenario however, it is now up to the IT industry to tackle the dual problem of attrition and skills gap to stay ahead in the race.