Two weeks ago, Forrester went to Brazil for Brasscom’s (the local IT and country promotion group) Global IT Forum in Sao Paulo and Rio. One of the most interesting and insightful presentations was by Jairo Avritchir, Brazil IT site director of Dell. Jairo talked about Dell’s experiences and how the firm’s utilization of the country and its rich IT talent pool had evolved. Initially, it was largely in support of the company’s local sales and manufacturing operations. Today, the center has emerged as a BI and analytics hub for the global organization. Given the 40% appreciation against the dollar over the past eight years, the COE strategy around higher-end BI skills was the only way the center could compete with India. The Dell example clearly points out how both clients and vendors need to think about and fully utilize their alternative geography investments. A blog post at Computer Weekly touches on this topic as well.
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.