(Repeats article published on Sunday. No changes to text.)
By Nivedita Bhattacharjee
MUMBAI May 11 Infosys Ltd, once a
bellwether for India's $100 billion-plus IT outsourcing
industry, is losing its cachet as the employer of choice for a
generation of young IT workers, with staff leaving at an
unprecedented pace as the Bangalore-based company struggles to
regain ground lost to rivals.
Current and former Infosys staff interviewed by Reuters say
morale has been dented by a series of senior management exits
and worries about career prospects as the company's revenue and
pay increases grow at a slower rate than at competitors such as
Tata Consultancy Services Ltd (TCS).
Annual revenue in the year to end-March rose 24.2 percent,
lagging growth of 29.9 percent at TCS.
The annualised rate of attrition at Infosys - effectively
the number of staff leaving or retiring - was a record 18.7
percent at end-March, 2.4 percentage points higher than a year
earlier. That's close to a fifth of the company's workforce of
more than 160,000. The attrition rate at market leader TCS was
India's outsourcing services industry has relied for years
on an army of engineering graduates to build so-called "bench
strength", key to winning new contracts in an increasingly
competitive industry. A strong "bench" signals to prospective
clients that the firm can assign enough technicians to new
projects. That signal is weaker when the number of staff
quitting a company rises to uncomfortable levels. It also does
little to attract new hires in the close-knit IT world.
"We were all excited when we joined Infy," said Sandeep
Chaudhary, who last month quit Infosys after two years to go and
work at a rival. "It has the best training and campus, but the
company fails to utilise the training it gives its employees."
Infosys announced an average 6-7 percent pay rise last month
for India-based staff, below the average 10 percent raise at
TCS. Third-ranked Wipro Ltd said it plans raises of
6-8 percent from June.
Offering lower pay increases than its rivals could mean
attrition levels at Infosys will rise further, UBS wrote in a
client note last week. UBS cut its Infosys stock rating to
'Sell' from 'Buy'. "Such high levels of attrition could impact
revenue acceleration," it added.
Infosys President Pravin Rao, a leading candidate to take
over as CEO when S.D. Shibulal retires in January, acknowledged
that attrition is higher than the 12-13 percent rate the company
is comfortable with.
Rao said Infosys is taking steps to stem the flow of those
leaving: restoring regular April pay rises, having more frequent
reviews for promotion, fast-tracking promotion for high
achievers and increasing the fixed component in paychecks. In
the past year, it has also held more 'town hall' meetings and
'jam sessions' where staff can speak informally with management.
"Yes, as a company we're seeing challenges on growth, and
when growth does not happen opportunities get limited so
attrition rises," Rao said in a phone interview.
He noted Infosys is hiring aggressively in sales, and
expected attrition rates would return towards more acceptable
levels in the coming quarters. "We're confident that once these
changes start sinking in ... and growth comes back, attrition
will come down," he said.
Some investors remain wary, however.
"If you lose too many people you have to redeploy them and
clients don't like that. I'd say it's the biggest issue at the
company right now," Bhavin Shah, CEO of investment bank Equirius
Capital, said by phone from Ahmedabad, noting the high levels of
attrition made him cautious on Infosys shares.
TRAINING, STOCK OPTIONS
Infosys was founded in 1981 when seven engineers, including
N.R. Narayana Murthy, pooled $250 - mostly borrowed from their
wives. The company's rapid growth kick-started the outsourcing
movement in India and coined the term 'to be Bangalore-d'.
New company hires are put on a 23-week training programme
regarded as among the best in the industry, and work in a
Silicon Valley-style headquarters campus on sprawling grounds,
with multi-cuisine food courts and state-of-the-art gymnasiums.
Employee stock options helped make some of India's first
In recent years, however, Infosys has been criticised for
not changing with the times, for being too conservative in
chasing new business and, at times, for depending too much on
Murthy, which some investors and analysts say has hobbled the
development of new leadership.
A revamp, dubbed "Infosys 3.0", aimed to move the company
up the value chain but fell short of expectations, prompting the
return of Murthy from retirement last June to try to revive its
fortunes. But his return, with his son Rohan as his executive
assistant, saw at least nine senior executives depart amid a
reshuffle of teams and titles. Some Infosys insiders say
Murthy's return was aimed at grooming Rohan for the top job,
prompting confusion and damaging morale.
"When senior management leaves in bunches, we begin to
wonder if it's a sinking ship," said one Bangalore-based
software consultant who has worked at Infosys for six years, but
who didn't want to be named as company policy doesn't allow
staff to speak to the media.
Most of the 18 current and former Infosys employees whom
Reuters spoke to declined to be named.
Not everyone at Infosys wants out, and some said they were
confident that Murthy's turnaround efforts would succeed. "These
are hard times for Infy and a lot of employees are leaving. But
I think these measures taken by Mr. Murthy are good," said
another 6-year Infosys 'veteran', who plans to stay.
Others, however, are looking to move on, and four
headhunting firms in Bangalore, India's IT hub, said they had
seen a surge in resumes from Infosys staff over the past year.
They did not provide numbers for competitive reasons, but
Shreya Bajaj, general manager at MapleCode, noted that most
Infosys staff seeking jobs through the agency now would consider
moving to a smaller company, something that would not have
happened 18 months ago.
"For the last two years, there have been no significant wage
hikes, there's saturation in career growth, the company's
results have been below market expectations and there's internal
strife, with senior guys leaving," she said. "Regular workers
are feeling there's not much chance of growth in the company."
Future growth for India's large IT vendors is expected to be
driven by infrastructure services and social media, applications
(apps) and cloud computing (SMAC) - areas where analysts say
Infosys lags rivals such as Cognizant Technology Solutions
Murthy has said it would take a few years before Infosys
gains significant ground in SMAC.
"Infosys is now beginning to focus on these segments, but in
the next 2-3 years, we think Infosys' large base in the slower
growing applications segments will remain a drag on revenue
growth relative to peers," UBS wrote in its note.
(Additional reporting by Aradhana Aravindan; Editing by Sumeet
Chatterjee, Tony Munroe and Ian Geoghegan)