Information technology (IT) companies are altering their onsite employee mix in favour of locals to improve the business prospects in those geographies and cut down “people movement and transfer cost.”
Not long ago, domestic software companies would hire not more than 10% locals at their overseas centres. The remaining 90% of the workforce would consist of Indians sent from here on deputation. That has changed drastically in the last few months. Most companies have already increased the percentage of locals on their onsite team to over 20%, with plans of increasing it further.
For instance, Wipro currently has 20% of its workforce outside India as locals and expects to take it to about 50% in the coming years.Its bigger rival Infosys Technologies has also been increasing the percentage of locals working in its foreign offices over the last few quarters.
According to T V Mohandas Pai, human resource head at Infosys, of the 18,000 people employed at the company’s overseas centres currently, 5,000, or around 28%, were locals. “We are planning to increase this number further,” he said.
And it’s not just the top-tier firms that are shoring up the number of locals on their onsite teams. Mid-sized companies such as MindTree have also been aggressively hiring locals to man its overseas offices.
Puneet Jetli, senior vice-president and head of people function at MindTree, said the trend took root some months back and was lately getting accelerated.“Frankly, I think such a strategy needs to be encouraged as it offers the benefit of getting someone who has better awareness of cultural and business context in that region. A local can also build a better relationship with customers in his own market than an Indian, who will start from scratch to understand that market,” he said.
Also, locals are easier to hire, Infosys’ Pai said, perhaps referring to immigration rules, which have been made stringent in the US to restrict the number of H1B visas.
Somewhat contrary to popular belief, the company officials would have us believe the higher count of locals isn’t pushing up their people costs.MindTree’s Jetli maintains that locals come at the same price as Indians, who are deployed on the onsite team from India.He believes the net cost of hiring a local may be even lower as it does not involve “movement and transfer costs” —- expenses on visa and settling an employee overseas, which were only shooting up.
An analyst with a domestic broking firm, however, said that while a higher percentage of locals on onsite teams is beneficial for IT companies, availability of talent could be a problem in many geographies. “Which country produces engineering and other graduates in bulk like India? It’s only China, but even that geography has been slow moving for most service providers,” he said.
Going by the analyst, this crunch of skilled workforce would eventually push up the HR cost, which in turn would impact the operating margins of the companies.
Seepij Gupta, lead analyst, IT services and security solutions practice, IDC India, said such a move of hiring more locals works well where there are compliance needs or service level agreements, or demand for setting up near shore capabilities to meet specific customer or market requirements.
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