According to a top Wipro executive, the rapid proliferation of well-funded global competence centers (GCCs) has been a significant driver driving attrition in the information technology sector.

Indeed, Wipro is the first IT firm to recognise how GCCs are recruiting skilled individuals with 4-10 years of expertise by offering pay levels that IT firms cannot match.

"Captives are proliferating in India, attracting a large number of talent from (IT) services firms." "This is pushing up our compensation because these companies are doing more offshore in-sourcing and can afford to give higher raises to employees," Wipro's chief human resources officer, Saurabh Govil, told Mint.

According to him, the GCCs are generally looking for persons with 4-10 years of work experience and are looking for ready-made talent. "The capacity for GCCs to pay is higher."

According to a research for FY23 by IT industry apex organization Nasscom and consulting firm Zinnov, there are 1.68 million professionals working in GCCs in India, with the number likely to quadruple by the end of 2026. Recruiters for both IT and GCCs estimate that the centers hire talent at a 30% premium over an IT firm.

"The GCCs are hiring the most in the IT sector, followed by enterprise customers expanding their tech talent." GCCs are also expanding into smaller areas, and they are hiring from IT firms there as well', said Vijay Sivaram, CEO of Quess IT Staffing. Sivaram estimates that there are approximately 1,600 GCCs in India, with 800-900 of them hiring heavily and employing more than 5,000 people.

The majority of tech organizations' pay costs reflect the high attrition rates and counter offers to retain outstanding people. According to executives, employee costs as a percentage of spending at two of India's top three software services firms—Tata Consultancy Services (TCS) Ltd and HCL Technologies Ltd—were at least six years high in the September quarter.

According to a Mint research, TCS' labor expenditures accounted for 77.4% of overall expenditure, while HCL Tech's wage costs accounted for 69.6% of total expenditure. Wage expenditures at Infosys were 68% of total spending, down from 68.4% in the June quarter. Wipro's wage expenses peaked at 71.3% in the first quarter and fell to 70.2% in the second.

"People with specific expertise and skill sets will continue to be in high demand." People are relocating and departing in a context of 13-14% attrition," said Govil.

Wipro reported 15.5% attrition, while Infosys and HCL recorded 14.6% and 14.2%, respectively. TCS, the market leader, experienced 14.9% attrition in the September quarter. However, attrition rates at the four tech firms have dropped dramatically.

However, the only silver lining for IT services firms is that poaching would be limited because the scaling opportunities for GCCs is limited in comparison to IT organizations. "The cycles continue. Because technology is so important to any business, it must be sourced. Furthermore, if they (GCCs) are not scalable, it becomes an issue," Govil remarked.