Home / Industry / Infotech /  IT firms need to scale up their presence beyond large cities like Bengaluru if they want to arrest attrition

Bengaluru may be the country’s technology capital. But Chennai is the technology services capital of the world. The city is estimated to be home to over 750,000 engineers working in the $227 billion IT services sector.

Now, save for Infosys Ltd, none of the IT services firms disclose their employees across cities. But according to executives at the largest firms, the five largest technology services firms, including Tata Consultancy Services Ltd, Cognizant Technology Solutions Corp, Infosys Ltd, HCL Technologies Ltd and Wipro Ltd, employ over 300,000 people in Chennai.

TCS has over 100,000, or 17% of its 6 lakh employees, in Chennai. The Bengaluru twins, Infosys and Wipro, together, have 60,000 people, while both Cognizant and HCL have a third of their total workforce in the city.

Engineering colleges, decent infrastructure, an international airport and a US consulate (Bengaluru does not have one) helped Chennai emerge as the largest factory for the IT services sector.

Despite having a larger presence in Chennai, IT companies have lower staff attrition in Chennai compared to, say, in cities like Bengaluru, Hyderabad and Pune.

One reason is that Chennai has fewer choices for employees. This is because the city got stuck in what Ramkumar Ramamoorthy, former chairman of Cognizant India, calls a “homogenous technology ecosystem of mostly IT services and BPO companies".

Bengaluru started as the hub of the boom in software and business process outsourcing about three decades back. An abundance of talent and a cosmopolitan atmosphere attracted both MNCs to set up their technology offices (called captive centres) and the world’s largest tech companies, including Google, Apple and Microsoft.

This ecosystem further helped the city in the last decade become home to thousands of young firms backed by venture capitalists, helping Bengaluru earn the moniker of the startup capital of the country.

A similar script is playing out in Hyderabad, and Pune, too, is on the path to becoming a preferred destination for technology companies.

This growth offers many career opportunities for a techie living in these cities.

But this spells bad news for employers like Infosys. The Bengaluru-headquartered company counts about 40% of its workforce in Bengaluru, Hyderabad and Pune.

Put simply: A company like Infosys is forever fighting to retain its staff. Infosys, at the end of the June quarter, had an attrition rate of 28%.

Infosys’s challenge is in contrast to a smaller company like Coforge Ltd (formerly NIIT Technologies), which had an attrition rate of 18% at the end of June 2022. This could be possibly explained that 40% of its 21,000 employees work from Greater Noida, a city that does not offer many employment opportunities in the tech sector.

High staff attrition is not good news for a company. Sure, some churn is good as it brings fresh blood into a company. But HR executives say that anything over 20% a year is unsettling.

Fewer opportunities are why companies like Infosys and Cognizant have lower employee turnover in Mohali in Punjab and Coimbatore in Tamil Nadu. This is also why Cognizant has a lower staff turnaround in Kolkata, a city trying to shed its image as a bastion of trade unions.

So how can technology services companies hang on to their staff? An easy answer would be to pay more. But the pandemic has shown that alone is not of much help.

It is time for IT services companies need to further scale up their presence in smaller towns instead of extending their presence in larger cities.

HR leaders agree that all the IT companies will look at further scaling up their presence in cities like Bhubaneswar and Visakhapatnam. Getting the best talent to work in these smaller towns won’t be easy. But technology services firms need to double down on these efforts, especially when larger cities are bursting at the seams and the infrastructure is crumbling.

Bosses like Rishad Premji are witnesses to this.

Earlier this month, the torrential rains in Bengaluru flooded the residential enclave, forcing the chairman of Wipro to use a boat to vacate his house.

Sadly, unplanned growth in large cities has shown that as companies scale up, the ruling class only scales down. So the way forward for companies is to look beyond metropolises.

Varun Sood
Varun Sood is a business journalist writing on corporate affairs for the last fifteen years. He also writes a weekly newsletter, TWICH+ on the largest technology services companies. He is based in Bangalore. Varun's first book, Azim Premji: The Man Beyond the Billions, was brought out by HarperCollins in October 2020.
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