Big Quit sends the global back office abroad

Helpdesk staff work on computers in Angers, France, July 3, 2019. REUTERS / Stephane Mahe

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MUMBAI, December 24 (Reuters Breakingviews) – The Grand Quit will make relocation attractive again. When the pandemic subsides, and with it the stigma of letting people go, the work-from-home revolution will encourage many global employers to move jobs back to low-cost technology hubs. While this should benefit Indian IT service providers like Tata Consultancy Services (TCS.NS) and Infosys (INFY.NS), they ironically face similar issues.

Remote working has become a happy norm for many workers in the information industry. Businesses from New York to San Francisco to London and Paris are struggling to get workers back to the office, resorting to ever-more generous incentives, from free meals to free transportation.

Employers are in retreat as the pandemic has led to a huge increase in demand for technology services as businesses accelerate their digital strategies. Revenue growth for the industry mainstay Infosys more than doubled to 21% in the September quarter year-on-year from pre-pandemic levels, for example.

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One likely solution to the workforce problem will be to move more jobs overseas, reversing a recent trend where many companies in the United States and Europe have focused on offshoring or near-offshoring. of their technicians to please politicians or simply to get closer to the rich. – global customers they serve.

Still, Offshoring 2.0 will be a tough business as service providers grapple with unprecedented levels of attrition in India, the original low-cost hub. Cognizant Technology Solutions (CTSH.O) lost 37% of its more than 300,000 India-dominated employees on an annualized basis in the quarter ending September. Others like Wipro (WIPR.NS) report 20% attrition.

As in the West, Indian workers are struggling to juggle their jobs as prolonged school closures take their toll. Junior employees who worked in their towns and villages during the pandemic are quitting simply to avoid returning to cramped, shared apartments in polluted cities. The talent shortage is expected to persist even as the pandemic eases, as India’s own national tech industry is booming and its more than 100 unicorns compete for labor, leaving techs to do nothing but spoiled for choice in terms of jobs.

Some global IT service companies are already doubling their operations outside India: Mphasis (MBFL.NS), controlled by Blackstone (BX.N), is opening offices from Mexico to Costa Rica. Expect others to step up their plans abroad as well. But an equal number of companies familiar with the WFH will bet that hiring in India will be less of a financial pain than keeping jobs elsewhere.

(This is a Breakingviews prediction for 2022. To see more of our predictions, click here.)

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NEWS CONTEXT

– Cognizant, the US-listed, New York-listed IT services company, on Oct. 27, reported an annualized attrition rate of 37% of its workforce in the September quarter, up from 21% before the pandemic.

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Editing by Rob Cox and Katrina Hamlin

Reuters Breakingviews is the world’s leading source for financial information on agenda making. As the Reuters brand for financial commentary, we dissect the big companies and economic stories from around the world every day. A global team of around 30 correspondents in New York, London, Hong Kong and other major cities provide real-time expert analysis.

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