Attrition : Follow up

Last week one of my friends put in his papers after spending about 2 years in his organization. The company in question is a US based MNC which is primarily leverging the cost arbitage to drive efficiencies for its US product development and professional services work.( Like most captive offshore units set up in India in the last decade.)

The guy in question had joined the organization about 2 years back and had been sent to the US for a 3 month training and transition before moving the product team to India. With a thin client facing team in US, the entire technology team was moved to India. Pretty much the model upon which the Indian IT industry has been built by the likes of Wipro, Infy and being emulated by others like JP morgan, Goldman Sachs etc for the last 10 -12 years or so. With attrition being so common in India, all the organization had to do was get another guy with the similar background and technology experience and fill in that position.

So why I am even discussing this story here ? Well as a result of this guy quitting, the US team decided not to hire someone in India and instead hire someone locally in the US. The agrument to justify this decision is indeed compelling.This position was moved to offshore ( or best-shored) about 5 years back to India. In a span of 5 years, my friend was the 3rd guy to be hired for this position and being trained by the team in the US.

The US team had just got frustrated .. training and hiring folks only to see them leave after 2 years. This despite giving a double digit salary increase to this guy in the 2 years span.The math here quite simple , Hiring and training costs : About 15K, Salary to this guy :15K, overhead( for time zone differences and communication : another 10K. Total 40K. Spend may be another 10K ( or may be more) and you end up getting someone who will work in ur timezone and will probably stay on with the organization for the long term ( and as bonus not ask for the double digit salary hike).

So the question : Is attrition and the Indian Engineers penchant to only work for the salary leading to a early demise of the Indian Offshoring model ? Admittedly this situation would have occurred sometime in the future but I think this incident of my friend is not one off. Recently , we saw a big UK based bank moving call center jobs back to UK citing poor quality as the reason. I am pretty sure Attrition is somewhere adding to the poor quality -- remember attrition rates in the BPO sector is abnormally high ( ranging from 20% to 50%)

So again going back to the question which I raised in the previous blog posting .. why is attrition rate in India so high ?