Tech majors must refrain from outdated protectionist measures

Indian ITES giants’ legal teams appear occupied, not with M&A deals or growth contracts, but rather with the task of retaining talent. Indian tech majors fight each other, over talent they are not able to retain in the first place. Time for honest soul searching?

Amid increasing executive turnover and a challenging business landscape, two prominent domestic IT companies — Infosys and Wipro — have raised concerns about alleged unethical poaching tactics by their rival firm Cognizant. Earlier, Wipro initiated legal action against its former CFO, Jatin Dalal, for joining Cognizant, citing a breach of the non-compete clause. Subsequently, Infosys has communicated with Cognizant, cautioning against similar poaching practices. Since taking office in January 2023, Cognizant’s CEO Ravi Kumar, a former Infosys veteran, recruited more than 20 executive vice presidents and four senior vice presidents, a considerable number of whom hail from Wipro and Infosys.

Employing legal actions and media campaigns to coerce senior executives into staying with the company is an ineffective approach. It is an outdated protectionist measure employed by large entities. Non-compete clauses typically lack enforceability in courts, and filing cases is often a strategic move to create an optical deterrent. In the current scenario, if the talent is good and essential, the recruiting company will cover all legal expenses and adequately compensate the executive they hired.

When an executive decides to leave a firm for any reason, attempting to hinder their employment elsewhere proves ineffective. Either such executives should be compensated for an extended garden leave, including full performance pay, or they may resort to utilising opaque corporate structures, such as consulting contracts, to work for the company they had intended to join. If the entity fails to persuade the employee to stay back, such pressure tactics are counterproductive, conveying a negative message and implying to potential employees that they too will be constrained in their ability to leave, when they so decide.

Amid the competition to attract top-tier talent, companies must provide more than just financial incentives. They need to emphasise their capacity for growth, ensuring that talent is not only suitably employed but also duly rewarded. Furthermore, in the tech industry, the expectation is evolving towards wealth creation and its distribution among employees, albeit not in the conventional manner. One may even see that for critical tech talent in the era of AI, wealth creation may include the sharing of IP royalties.

The escalating margin pressures from global clients on Indian ITES firms underscore the critical importance of retaining key employees. As clients demand cost-efficient solutions and increased value for their investments, the significance of skilled and experienced personnel becomes paramount. In this competitive environment, retaining key employees who possess domain expertise and contribute to innovation is vital for sustaining service quality and meeting client expectations.

It is indeed the right time for Indian tech giants to consider diversifying their talent pool and, more crucially, expanding the expertise they provide to clients. The diminishing effectiveness of Indian ITES as a talent magnet suggests that organisations need to be genuinely meritocratic, free from the founders’ firm grip, outdated organisational designs, and living on past legacy. A hard question is whether these companies are perceived as relevant in the broader client mindset.

Srinath Sridharan is a policy researcher and corporate adviser. X: @ssmumbai.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH).