Q: What will be the impact of rising wages & attrition on Indian IT/ITES Outsourcing?
A: Clients are very wary of being in continuous start-up mode with a churning account team: its slow, resource intensive, and errodes service quality. Clients who are in their second round of outsourcing recognize this and tend to emphasize SLAs or Key Measurables measureing attrition and turnover rates.
On the other hand, Service Providers say "as long as we meet our SLAs, it shouldn't matter what our attrition rates are." While there's some merit in that, performance SLAs can be lagging indicators - they let you know how things went in the past. Lagging indicators are good measures, but leading indicators are useful too. For example, if we know that high turnover will eventually impact service, than it makes sense to measure turnover rates as a precursor to measuring SLAs. Attrition Rate SLAs are a leading indicator.
Of course, this approach only solves the problem for the single client, and condenses the problem for other, less savvy customers of the Service Provider. Much in the way IT wages in the US hit a saturation point in the late 1990's/early 2000's, market forces should stabilize wages in Inda --- eventually. In the meantime, look for Service Providers with ingenious retention programs. Even with rigorous due diligence, it can be very difficult to determine accurate attrition rates.
