At a time when rising bets on digitalisation by businesses continue to shore up appetite for IT services, Tech Mahindra is crafting a strategy to meet the growing demand: onboarding talent from tier two and three cities. Not only is hiring from these areas cheaper — the average employee costs can be lower by as much as 15% but the dropout rates in tier two towns are also equally lower, the management indicated in its recent quarterly earnings.

“The growth levers are evident. We all need to now worry about the supply chain side. That is why, we are going into tier two and three cities. Skills are available in these regions but they have not been marketed very well,” managing director and CEO CP Gurnani tells Fortune India.

Tech Mahindra is aggressively betting on talent from Trivandrum, Vizag, Nagpur, Bhubaneswar, Chandigarh, Kolkata, Indore, Vijayawada and Coimbatore. The firm has hired over 8,000 employees from these centres in the last couple of quarters. “Now, obviously, this will help us on cost, but this will also help us in creating a funnel,” company executives said in the Q3FY22 earnings call earlier this month.

The Indian IT industry has been grappling with high attrition rates. A restricted pool of talent equipped with new age tech capabilities has triggered a talent war among companies. “Today there is a lot of demand for futuristic skills, and in India the availability of such skill sets has been limited... those who are in the job market currently have multiple job offers,” says Rituparna Chakraborty, co-founder and executive vice president, TeamLease Services.

Besides, a spate of tech startups backed by deep-pocketed investors have widened the scope for job seekers. Tech Mahindra’s attrition rate (LTM) stood at 24% in Q3FY22 against 12% in the year-ago quarter and 21% in Q2FY22.

“If there is attrition, that means there is demand. Overall demand has increased and if we are not able to find alternate methods, we will not be able to run our shops efficiently. If, say, my original business plan was at 12-25% attrition, now I need to make the business plan at 18-20% attrition and then find ways to still fulfil the requirements,” Gurnani says.

While hiring from smaller cities is definitely a way out, IT firms are also ramping up intake of freshers to counter high attrition. Tech Mahindra calls it the ‘juniorisation’ strategy. The company plans to add 10,000 freshers in the current year and the idea is to “increase it substantially as we go forward in the next year, the management said.

The company’s consolidated revenues stood at ₹11,451 crore during the October-December quarter which translates into a 18.7% year-on-year growth over Q3FY21. Profit after tax saw a 4.5% y-o-y increase to ₹1,369 crore in the previous quarter.

As the tech ecosystem evolves to accommodate Web 3.0, Tech Mahindra is building capabilities around metaverse which Gurnani describes as “dematerialisation, democratisation, decentralisation of physical space, distance, objects.” The company did not give details on its metaverse play. Blockchain and quantum computing are other areas that the company is betting on.

“We are working on a holistic Block Ecosystem framework comprising levers like Block Studio, Block Engage, Block Talk, Block Geeks, Block Accelerate, Block Access and Block Value,” the company says in its annual report.

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Tech Mahindra 'juniorisation' strategy bets on tier 2,3 talent, here's how