What's driving IT giants to scour for talent in tier-2 and tier-3 cities

Utkarsh Pandit, a 26-year-old from Agra, works with Sprinklr, an American SaaS (software-as-a-service) company based out of Bengaluru. His joining the firm as a product engineer coincided with the onset of the pandemic in 2020. Till date, he has not visited the headquarters in the metro, having been working from home (WFH) since day one of the job.

“I like the concept of working from one’s hometown,” Pandit told The Federal. “My cost of living is manageable, and I have my family around me all the time. I have made up my mind to continue with the setup for as long as possible.”

Like other IT giants, his employer also has a plan to ‘bring the workplace’ to one’s hometown, said Pandit. This would entail the employees in a particular city logging into satellite offices. However, he pointed out, how many employees would agree with even this is doubtful, as “many of us are just happy working from home”.  It is futile to build satellite offices when WFH is rendering productivity, he added.

Satellite centres on the rise

However, more and more tier-2 and tier-3 cities are cropping up on the radars of IT firms, who are looking at opening satellite offices in these centres. According to a report by software industry body Nasscom, titled Future of Work- Implications for India Tech Industry, there is a need to set up hybrid working models and satellite offices that will attract, retain and engage the workforce in a better way.

A Randstad Talent Trends report said that among the tier-2 cities, Chandigarh, Vadodara, Indore, Coimbatore, Kochi and Trivandrum are emerging as key IT employment hubs. At the junior level of talent, Vadodara leads with 14 per cent of the IT jobs among tier-II cities, followed by Chandigarh, Jaipur, Coimbatore and Kochi, it added.

Recently, Zoho, a Chennai-based technology firm, opened a 350-seater software delivery in Trichy. Chennai-based Gofrugal, a cloud-based IT company, has opened a 150- seater satellite office in Madurai. In 2020, Tech Mahindra opened a delivery centre in Warangal. Other IT giants, such as Wipro and Infosys, have offices in centres such as Guwahati, Mysuru, Bhubaneshwar and Vadodara.

What’s driving the push

IT experts say such a system aims at hiring local talent and training them with the necessary industry skills. Companies suddenly have a much wider pool to recruit techies from. Earlier, an aspirant from a remote tier 3 city in Odisha may have hesitated to move to Mumbai. Today, the company is able to take the workplace to that tier 3 city.

Among the other key reasons is the pandemic and its impact. With the onset of COVID, a hybrid model of work was preferred by employers as well as employees across the country. Amid the lockdowns, many employees had to return to their hometowns and are now reluctant to return to cities. 

Media reports indicate that better dining and entertainment options in smaller cities are also demotivating employees to return to IT hubs. The draw of the hometown, with the ability to be with one’s own, especially aged parents, is unmistakable.

What’s further inducing IT firms to set up centres in tier 2 and 3 cities is the growth of real estate there. Satellite offices with the required infrastructure can be set up at much lower costs in these cities than in, say, Noida or Gurugram.

Battling high attrition

Yet, say experts, the biggest reason for IT firms to move toward smaller cities is the alarming attrition rate in the sector. The companies are keen to retain employees and would go to any length for this; if that means letting them work from their own cities, so be it. 

In 2021, the attrition rate in the IT sector is estimated to have risen 25 per cent, with not much let-up afterward. For instance, in the third quarter of FY22, Wipro and TCS are estimated to have seen attrition of 25.5 per cent and 15.3 per cent, respectively.

Studies show that post-COVID, employees are not satisfied with just competitive salaries, but increasingly prioritise flexibility and work-life balance. Employers, on the other hand, are trying to retain workers by hiking salaries and benefits, offering flexible working hours and focusing on skill-developing programmes. 

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Letting them work from their hometowns, or, for that matter, from anywhere, is often among the ‘perks’. Rajat Kaushik, who works remotely for IT startup Graphy by Unacademy, told The Federal the hybrid model gave him the freedom to work from anywhere. “Be it my hometown, a beach or even a hill station, as long there is good internet available, I can work with ease,” said Kaushik. This has boosted his productivity and also “given me more control over my work”.

Microsoft is reported to have conducted a survey that showed that only 8 per cent of employees wanted to return to office full time.

While some employees are satisfied with WFH, others think satellite offices offer an optimal solution. According to Pandit, hybrid working from one’s hometown scores well above moving to a new city for work. Keeping the smile on Pandit serves his employer well, too.