1 in 3 Employees are leaving IT Companies - What is changing fundamentally in IT Sector?

General
1

Nifty IT has corrected 20% from its top and is technically nearing bear market.

Now, One may wonder what’s causing this defensive sector for all these years to fall this much when the yearly performance of the major companies has been pretty robust. But still, we are witnessing great fall. Lets try to figure out why :

My Observations

I have tried to study and do some research with various folks in the IT industry and these are some of my observations :

1. First and foremost, The major issue that IT companies are facing is supply side constraints. What we are witnessing is major level of attrition levels. In a company like Infy, almost 1 in 3 are leaving the company.

The costs of employee has risen exponentially. Here’s some of the information I got (it would be great if some of you can confirm or deny the same)

Fresher’s who form a large part of any IT company, Their salary which used to be somewhere btwn 2.5 - 3 Lac per annum has now slowly increased to 5-7 Lac per annum. To put things into perspective, people with 5+ years experience used to have such income (btwn 7-10 Lac p.a) before an year or so. Now, these folks are getting offers btwn 15-20 Lac.

So, with the limited amount of information that I have gathered, the average rise is seen somewhere btwn 100-150% which is stretching to 200% in few cases.

We know that salaries are increasing for sure. But, what’s causing the shortage of supply is the mystery part which only folks who are dealing in technical side of the industry will be able to share.

This sudden surge though has some consequences :slight_smile:

  • The premium factor (low cost workforce) that differentiated and gave an advantage to Indian IT employees and companies with other country workforce is slowly fading away.

  • With geopolitical tensions, we are headed to a world where globalisation will not be as straightforward as it was all these years.

  • With growing focus on technology, If there is one field which is easily replaceable , It is the services one.

  • Increased Competition locally and across the world.

2. With management sounding cautious about the growth as well going forward, It seems like a double whammy for the sector going forward.

3. Money flow seems to be happening in sectors which do well in high Interest rate environment like 2000s.

Would love to hear your insights on the reason for supply shortage in IT Sector.

4 Likes
2

I think this correction in IT space is more to do with valuation rather then business fundamental.
While many of the challenges listed are relevant, these are not new. And IT companies are still making huge profits.

The problem I see is that post COVID lockdown valuations jumped crazily. One reason for that could be that when everything else was closed, IT companies were still fully functional and making money, and that’s why everyone wanted to buy IT companies at whatever valuation. Just look at all time charts of some IT companies and see the jump in prices around 2020:

image
image985×445 33.2 KB

image
image1099×547 44.4 KB

image
image1087×514 45 KB

There was lot of froth built up in valuations.
Now, I think those valuations are correcting to more meaningful level, commensurate with profits and growth

1 Like
3

  1. With inflation on the rise, people are not willing to work for pittance and loose change as salary.

  2. With higher consumer spending among the middle class the opportunities to make easy money at your own time through entrepreneurial / freelance activities has increased.

  3. People are not willing to sweat blood to earn a living, like any developed country the semi skilled workforce in our country has become lazy.

  4. Older generation are liquidating their ancestral real estates at a very high rate and the money is getting passed to younger generation of the working age. The younger generation having access to all these surplus cash find no meaning in having to work for a living.

3 Likes
4

Educated skilled / semi-skilled citizens from the middle class segment of the society are unwilling to work and fill the gap.

In our country, for so long, the burden of educating a citizen and preparing them for a skilled / semi skilled employment was up on the parents.

What I think is, we will soon enter a phase where, the burden of identifying prospective employees for the future at a very young age (from the segment of the society that actually needs to work, to earn a living ) , educating them and preparing them for employment will be up on the employers.

1 Like
5

Agree. All IT stocks are trading above the median average PE of 5/10 Years.

Agree. The 2nd/3rd Generation people are finding it hard to work when they perceive that they have sufficient wealth.

While many companies train employees for their respective jobs after they join their company (Like Infy, TCS) some companies are training employees before hand. (Like Zoho)

6

You are right up to some extent feel :+1: good job

7

I was referring to that segment of the population, that are forced out of primary / secondary / college education because they cannot afford to stay in education or are forced into unskilled work at a very young age to earn money for the family.

1 Like
8

I have been a part of several IT companies and whenever I saw a senior person leaving the job, they did it because they were going to open a company of their own. What you are saying might be possible but I feel that covid lockdown has given people a chance to plan their future and now when everything seems to be okay, people are taking the next step.

1 Like
9

Being honest here working in IT . This is probably a biggest lie :joy:. Frankly for IT you just need Internet and laptop and thats it. Plenty of forums, codeshare , videos courses are available right from school or even college. Problem is school and colleges cripple people because they train people like factory workers whereas IT is totally opposite (heard many jobs have changed like that too). It’s kinda like open schooling and self learning with you planning and executing all the time. Because schools cripple you setting time table , subjects and programs with planning done by someone else , lot of people are kinda broken. That’s why WFM is challenging and very less remote workers are there.

3 Likes
10
11

Na, don’t bother. That’s normal in IT industry. We have crazy level of opportunities and many environments not like govt jobs where you are stuck with one boss , one project or department. Frankly people definitely need to move and work in different organisations to get people management skills. Plus the older you get more is the need to acquire management skills which will only come working in different organisations , different environments and working with different teams.

1 Like
12

An article you should have a look at.

13

I think it’s very normal for IT employees to leave their company after some time. It’s for their growth. They may not get good increments if they stay in the same company for years. But if they keep making switches, they get better salaries.

2 Likes
14

I know two friends in my social circle who have jumped ship in the last 6 months, who’ve got 40% hike + joining bonus. It’s a good time to be a IT employee! :slight_smile:

1 Like
15

I thought that was common in every sector. The company you work for doesn’t give you a good increment. You have to move to a new company to get a better salary. That’s what all the IT employees have been doing. Some of them may even come up with their startups in some time.

16

I think that’s very normal. No IT employee sticks with a company for too long. They keep looking for better job opportunities and leave when they get them.

17

It’s ironic that your company is ready to give a hike of 30-35% to a new employee. But when it comes to the existing employees, the company is not ready to give even a 10% increment on their salaries. So, no employee would be ready to stay in such a company for long.

2 Likes
18

Growth is what employees find in any industry. A normal tech employee will start their own business or freelancing after some years. Or they will leave to explore other areas like management, etc.

1 Like
19

Employees are always looking for a switch which will increase their salary. Thus, it does not make much of sense to stick around with a company for long. In IT, there are multiple options available for employees and for those who know their job well, they can easily switch.

1 Like
20

There are many reasons why they do that. Some do not find growth and switch to other careers. Some go for freelancing and opening a business. There are plenty of options. They choose what seems the best for them.