IT engineering firms, LTTS, and Cyient struggle with high attrition rates

IT engineering cos provide product engineering services in auto, aerospace, medical device, and utility sectors. On the other hand, software engineering firms are mostly engaged in software products

While large IT service firms have reduced their attrition levels to 15 per cent, companies like Cyient, LTTS, and others continue to face high attrition, according to a report published in Financial Express (FE).

The report said attrition levels at Cyient stood at 20.4 per cent, while LTTS reported its attrition at 16.7 per cent. French IT giant Capgemini's operations and engineering department reported the highest attrition rate, 20.9 per cent, in the second quarter of financial year 2023-24 (FY24).

Reasons behind the high attrition

The primary reason behind the high attrition rates at these companies is the growth of the IT engineering services sector and the high demand for talent from IT engineering service companies and global capability centres (GCCs) that are active in engineering research and development (ER&D).

How are asset-heavy engineering cos different from software engineering firms?

Asset-heavy IT engineering companies provide product engineering services in the automobile, aerospace, medical device, industrial equipment, energy, and utility sectors. On the other hand, software engineering companies are mostly engaged in software products and platforms.
 

Talking about the differences between IT service and the ER&D sector, Karthik Natarajan, executive director and CEO of Cyient, told FE, "IT services are predominantly led by BFSI and tech, and if you look at ER&D, which is predominantly led by manufacturing, especially auto, aero, discrete manufacturing, and any of the energy and industrial companies, they were actually suffering from the supply chain issues during the pandemic."

Growth in engineering research and development space

According to a Nasscom-BCG report cited in the FE report, India will likely contribute more than one-fifth of the global ET&D sourcing market by FY30. The report titled "Seizing the ER&D Advantage: Frontiers for 2030" said that India's market share in this space is projected to increase from $44-45 billion in 2023 to $130-170 billion by FY30. India's large pool of talent and the mature ER&D ecosystem give India an edge, the report added.