One of the major challenges facing the Indian IT services industry is the high rate of turnover among Indian IT professionals.
I will start this article by telling a story.
Recently, we were approached by a software vendor that had outsourced its new product development to India and were looking to have someone else take over because they were fed up. They were 14 months behind schedule, had spent well over $1M, with 20,000+ high severity defects and were facing the loss of funding to move forward, which would cripple their business. But they choose their vendor wisely. They invited the team of 8 senior people over from India to engage in knowledge transfer for 3 months and sent their own people to India for several weeks.
So what happened? Well, besides the obvious time and cultural challenges of outsourcing software development to a far off land, they also had 100% turnover of the original 8 people that spent 3 months on knowledge transfer. The customer ended up spending much more time explaining what they wanted, retraining, and fixing bugs to no avail.
So, the point is that vendor attrition can seriously damage your project and even your business.
Why is this happening?
Rapid growth among outsourcing industry has created a dynamic labor market, especially in Asian countries. For example, companies in India have turnover rates exceeding 30% and for small companies it is not unusual to see offshore staff turnover rates exceeding 50%.
This attrition rate is primarily due to the restricted career options or growth opportunities that workers have. Some leave their career pursuing a higher education, but some others leave their current job looking for higher pay and more benefits.
Higher skilled resources generally have the highest attrition, because of the low payment and stressful work schedule. While working with an Asian country in a software development project, teams sometimes have to work night shifts or have calls in the middle of the night. All this is done to cope with the overhead caused by the time zone differences.
Staff attrition (or turnover) represents significant costs for the companies that obviously are charged to the client, increasing the cost of the project. “Some companies believe that the attrition rates in India—and the costs associated with them—are so high that they can override the benefits of lower wage costs.”
Even large companies, as Wipro, have to deal with this attrition rate. According to a report by Reuters, “Bangalore-headquartered Wipro said high staff turnover rates had forced it to replace 90 per cent of the 14,340 employees in its largely call centre-focused BPO business in the last year”
What to Do?
Before choosing a partner for an outsourcing software development project make sure their turnover rate is not more than 10-15%, thus ensuring that your project is completed in the agreed time and quality. Some customers seeking outsourced software development also specifically asked for the resource names to be designated in the agreement. In the end, it is a risk that should be considered.
*Turnover calculator
Back to: 10 Ways to Fail at Outsourcing
I will start this article by telling a story.
Recently, we were approached by a software vendor that had outsourced its new product development to India and were looking to have someone else take over because they were fed up. They were 14 months behind schedule, had spent well over $1M, with 20,000+ high severity defects and were facing the loss of funding to move forward, which would cripple their business. But they choose their vendor wisely. They invited the team of 8 senior people over from India to engage in knowledge transfer for 3 months and sent their own people to India for several weeks.
So what happened? Well, besides the obvious time and cultural challenges of outsourcing software development to a far off land, they also had 100% turnover of the original 8 people that spent 3 months on knowledge transfer. The customer ended up spending much more time explaining what they wanted, retraining, and fixing bugs to no avail.
So, the point is that vendor attrition can seriously damage your project and even your business.
Why is this happening?
Rapid growth among outsourcing industry has created a dynamic labor market, especially in Asian countries. For example, companies in India have turnover rates exceeding 30% and for small companies it is not unusual to see offshore staff turnover rates exceeding 50%.
This attrition rate is primarily due to the restricted career options or growth opportunities that workers have. Some leave their career pursuing a higher education, but some others leave their current job looking for higher pay and more benefits.
Higher skilled resources generally have the highest attrition, because of the low payment and stressful work schedule. While working with an Asian country in a software development project, teams sometimes have to work night shifts or have calls in the middle of the night. All this is done to cope with the overhead caused by the time zone differences.
Staff attrition (or turnover) represents significant costs for the companies that obviously are charged to the client, increasing the cost of the project. “Some companies believe that the attrition rates in India—and the costs associated with them—are so high that they can override the benefits of lower wage costs.”
Even large companies, as Wipro, have to deal with this attrition rate. According to a report by Reuters, “Bangalore-headquartered Wipro said high staff turnover rates had forced it to replace 90 per cent of the 14,340 employees in its largely call centre-focused BPO business in the last year”
What to Do?
Before choosing a partner for an outsourcing software development project make sure their turnover rate is not more than 10-15%, thus ensuring that your project is completed in the agreed time and quality. Some customers seeking outsourced software development also specifically asked for the resource names to be designated in the agreement. In the end, it is a risk that should be considered.
*Turnover calculator
Back to: 10 Ways to Fail at Outsourcing
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