Another Reason to Nearshore? Indian IT Attrition Reaches 55%

When Frank Casale, CEO of the Outsourcing Institute, asked an executive for an Indian service provider to name the biggest challenge his company faces, his answer was attrition, at an almost reflexive speed.  High turnover on a team reduces productivity and cost effectiveness at an alarming rate.  Companies don’t want to begin a project with a team knowing that 55% of that original team could be gone, and replacements will need to be trained, every year.  This is the reality for some providers in India, where the attrition rate is at 55% in the IT and BPO sectors, according to a study by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).  The numbers below are the 2010 attrition rates for the U.S. IT industry, and outsourcing industries in Brazil, Chile, China, and India.

Sources: AT Kearney (Chile, Brazil), Indian Associated Chambers of Commerce and Industry (India), Pragmatic Outsourcing (China), and Compensation Force (U.S.)

Below are self-reported numbers from top Indian firms.  As expected, the reported numbers are significantly lower than those reported by a third party source (ASSOCHAM).  It’s likely that a combination of the smaller Indian firms play a role in bring the rate up, and misreporting on the part of Indian firms are contribute to the large discrepancy.  However, even taking these numbers at face value, they are in many cases higher than those found in Latin America.

Source: The Times of India

What factors contribute to lower attrition in Latin America?  In general, the family-oriented culture in Central and South America means less people are likely to relocate or leave their company for another.  Time zones are also a factor.  Business Process Outsourcing and customer service outsourcing professionals in India may have to adjust their working hours to accommodate the U.S. time zones.  With a well-developed market sourcing market where companies compete fiercely for skilled labor, employees in India will relocate for cents more per hour.  Even in Chile and Brazil, the comparatively low attrition rates can cause major problems.  Companies should ask their providers to name the measures being taken to reduce turnover among employees.