The recovery of IT spending late in 2009 and early in 2010 has sent the local players in India and multinationals scrambling for find talent. The fact that firms cut back hiring and reduced their bench to maintain margins has degraded suppliers’ ability to respond. As a result, vendors have turned to poaching talent from competitors. At its analyst day, Cognizant was honest that it had increased to 16% up from 12% for the trailing 12 months. One small vendor that Forrester spoke with said that it had peaked at almost 30% over the last quarter. Another said it was in the mid-20s for certain practices; yet another two multinationals said that it had seen a similar overall rise to Cognizant, but in some of the packaged application areas it was in the mid-20s.
The impact of this sudden increase attrition? Forrester believes that this spike coupled with the clients need to deploy more quickly and cost effectively will drive the much broader adoption of solution accelerators and other non-linear IP models. Today best practice is to get 5% to 7% of revenue. We expect that that percentage could easily double over the next 18 months as vendors deal with attrition and clients clamor for faster deployment of solutions.
Forrester’s newest survey of the IT spending environment has encouraging news that underpins our forecasts of a rebound in industry fortunes after the nasty recession of 2008-09. The good news for tech vendors is that IT budgets and purchasing plans are starting to reflect an improving economy. Last week, Forrester released results from our “Global IT Budgets, Priorities, And Emerging Technology Tracking Survey.” Among the top-level results: just over 40% of the 2,800 IT decision makers surveyed expect to increase their organization’s overall IT spending in 2010, up from just 12% in 2009; another 33% expect to hold their spending steady. So the overall IT budget environment has turned positive.
Respondents identified the top business priorities supported by IT investments as: 1) grow company revenue, and 2) reduce operating costs. No surprises there. But we were intrigued to see that “Drive new market offerings or business practices” ranked number 4, indicating that respondents are looking to IT to support and enable new product innovation.
We also see an uptick in spending on offshore IT services in 2010 vs. 2009, across ALL geographies. Survey results also show that more than half of respondents have either implemented or are planning to implement SaaS, illustrating the tech industry’s continuing shift toward new purchasing models based on operating rather than capital expenditures.