Indian user companies losing staff to outsourcers

Indian chief information officers (CIOs) are finding it harder to recruit staff because of large-scale hiring by the country’s outsourcing industry, a Gartner researcher said Monday.

India’s top IT services providers, focused on the global market, are regarded as the best employers, and get the best IT staff in the country, said Partha Iyengar, research vice president at Gartner, in a conference call.

Indian user organizations are hence finding it very difficult to attract and retain technical staff, particular in the middle management, Iyengar said.

A large number of Indian and multinational services companies have set up services delivery operations in India, and hire staff by the thousands each quarter.

The problem for user organizations may only get worse as outsourcing companies start hiring business line managers as well to build their vertical industry expertise, Iyengar added. As large Indian outsourcers grow in revenue by 30 to 40 percent each year, they will hire business managers from the banking, manufacturing, and retail industries, bringing business knowledge that can be integrated into their services offerings, he added.

This movement of business managers from the user industry to outsourcers will make it more difficult for CIOs to complete projects, as companies will have fewer business staff available to participate in the project, according to Gartner.

India is fast emerging as a key market in the Asia-Pacific region for outsourcing contracts, according to outsourcing consultancy firm, Technology Partners International Inc. (TPI) in Houston, Texas. Of the total value of contracts awarded in the region last year, Indian customers accounted for 24.8 percent, TPI said. That puts the country ahead of China with a 4.4 percent share, but still behind Australia at 32.4 percent and Japan at 26.8 percent, Peter Allan, a partner at TPI said Monday.

Faced with shortage of staff, Indian user organizations are looking to outsourcing IT functions. But Indian outsourcing companies have not shown great interest in this business, as they are more focused on more lucrative business abroad, Gartner’s Iyengar said. Multinational service providers like IBM and Accenture have bagged some of the larger contracts, but that still leaves a large number of Indian companies with smaller outsourcing contracts, who can’t find a good service provider, Iyengar added.

Indian IT spending is growing at a five-year compound annual growth rate (CAGR) of 14.8 percent, the highest in the Asia-Pacific region, to over $36 billion by 2009, Gartner said. This increase comes from rising expectations from businesses for IT to play a larger role in growth, efficiency and competitive advantage, it added.