IT companies and US economic crisis

Started by dwarakesh, Sep 26, 2008, 04:04 PM

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dwarakesh

Wipro puts 9,800 freshers on hold

Reeling under the impact of global meltdown, Wipro Technologies Ltd has kept about 9,800 graduate engineers, hired from campuses last year, waiting to join the IT bellwether, a company official said.

"Of the total 13,500 campus offerings made across the country last year, we have taken 3,700 of them so far, while the remaining (9,800) have been told to wait for their turn to join," Wipro vice-president for talent acquisition Pradeep Bahirwani told reporters at a hurriedly called press conference.

Due to slowdown in the IT industry and tough business environment, Bahirwani said, the company had discontinued campus offerings this fiscal for the time being.

"We have made 8,000 campus offers across the country in about 200 engineering colleges, including IITs and NITs (National Institutes of Technologies) this year as against 13,500 last year," Bahirwani said.

The company's novel initiative to ask freshers hired for IT services to join BPO division by paying upfront Rs 75,000 for bond backfired in Kolkata, with the hired engineers protesting against such the move and taking up the matter with West Bengal IT Minister Debash Das on Monday.

"The option has been given in commensurate with our current requirements, which are more in BPO than in IT services, as technical support role requires engineering grads and not those from science or general stream. There is no compulsion or change in compensation," Bahirwani clarified.

Defending the offer to join the BPO division, the HR official said the decision was taken to give an opportunity to engineering graduates to get on work without further delay.

Wipro's global IT services business had 97,552 employees, including 16,500 in the BPO division till the second quarter (July-September) of this fiscal.

dwarakesh

WNS not to venture into Indian markets

WNS Global Services is bucking the trend of IT-BPO companies looking at domestic markets to offset the negative impact of a global slump with a call to not participate in the Indian markets and keep its focus on exports, published media reports say.

A report in the Economic Times quotes group CEO Neeraj Bhargava as stating that the company would foray into APAC markets other than India besides looking to start a development centre in China.

The decision to stay away from Indian markets is fuelled by the fact that growth and margins are much better in the global market, Bhargava said adding that WNS Global would look at enhancing its business across the US and Europe before considering a growth strategy for the Asia-Pacific market.

Following reports of the global economic slowdown, Indian IT-BPO companies like Infosys, Genpact and Wipro have started seeking projects within the domestic market in an effort to diversify revenue streams besides cornering a share of the ever-growing market for outsourcing in India.

The newspaper quoted Bhargava as saying that WNS had evaluated domestic markets recently but decided to stay away due to the feeling that it was both immature as well as unattractive. With close to 85% of the domestic BPO market relates to voice-based call centre operations, the margins remain unattractive, he added.

As for offshore development centres, WNS already has one in Romania besides another one in Philippines through a joint venture. It is now looking to have a presence in China to service the APAC market in the none-too-distant future.

dwarakesh

Satyam plans to send staff on sabbatical to trim costs

Satyam Computer Services
, the country's fourth-largest services exporter, is taking a cue from its rival Infosys to trim costs as the global slowdown could impact revenues.

The company is looking at sending its employees on a sabbatical, but will take a final decision depending on the third-quarter results. Satyam has already scaled down its hiring projections for the current fiscal to around 8,000-10,000 compared to 15,000 that it had earlier projected.

"We are looking at various options to reduce costs and sabbatical is one such option. We will be able to shift our employees to take up social activities relating to our own corporate social responsibility programmes. Employees can also look at working with NGOs during the time of sabbatical. But, they will have to compromise on their salary during sabbatical as the pay structure will be lower than what they are currently drawing," said SV Krishnan, global head (HR), Satyam Computer Services.

According to him, the firm will finalise a decision depending on its third-quarter result. "If the result is in line with our expectations, we may not adopt any drastic cost-cutting measures," he said.

Currently, Satyam employs 47,000 people in the IT services segment. Inclusive of the BPO arm, the overall headcount is around 53,000. "It is not a viable option to shift IT employees to the BPO subsidiary as it is engaged in specialised works," said Krishnan.

Infosys, Satyam's peer, had issued letters to its employees saying they could opt for a one-year sabbatical to engage themselves in philanthropic activities. Infosys had said the employees would continue to draw 50% of their salary during the sabbatical.

Though Infosys' move coincided with the global financial meltdown and likely slowdown in the growth rate of the IT industry, the firm said that the option would be entirely voluntary for employees.

Industry observers reckon programmes of this kind will help IT firms cut down their costs as their major market, the US, is facing recession. "Visibility from the US market is still not clear and firms are under pressure to cut costs. It has triggered IT firms to look at ways to trim costs," said Harit Shah, analyst (IT, telecom), Angel Broking.

At present, wage bill accounts for over 60% of Satyam's revenues. Belt-tightening measures could help the firm cushion the impact of the global economic meltdown on its profitability.

SV Krishnan had earlier told  that the company could take a relook at the guaranteed component of the variable pay given to its employees.

Source: Economic Times

ganeshbala


dwarakesh

IT growth to halve- Infosys CEO

India's Infosys Technologies Ltd CEO said he saw the technology sector growing 15 per cent in 2008/09, its chief executive said.

"Last year the IT industry grew more than 30 per cent, this year it is looking at somewhere in the region of 15 per cent. So it has slowed down," S Gopalakrishnan told reporters.

Infosys would hire the 25,000 people it has targeted for this year, but there would be no fresh recruitments beyond that, except in specific skills, he said

There were no plans to cut headcount, he said.

Infosys has seen delays in orders but there was no change in its third quarter guidance, he added.

dwarakesh

Guj BPOs say 'work from home'

Going by the adage 'necessity is the mother of invention', business process outsourcing (BPO) knowledge process outsourcing (KPO) units in Gujarat keep finding unique ways to cut cost amidst economic slowdown. In order to reduce infrastructure costs and optimise on available resources, these units have been encouraging their employees to work from home or offer flexible working hours.

"Cost cutting measures are ubiquitous in these turbulent times. Therefore, BPOs and KPOs have been innovating in order to cut costs. Which is why options like working from home and flexible hours are being offered to employees. While this may not be possible for voice-based BPOs, the non-voice BPOs and KPOs have been looking at these options," said Nirav Shah, president of Gujarat Electronics and Softwares Industries Association (GESIA).

For instance, Contech BPO Services Pvt. Ltd. has been offering flexi-hours to its employees. It also plans to introduce home-based work projects once it takes up expansion of seats, said Rajan Vasa, chairman and managing director of Contech.

"By offering flexi-hours, we can optimise the existing resources and manage time as well as fulfill our commitments towards our clients. If and when needed, we may also opt for home-based projects in future when we will go for expansion of seats," he said.

The trend is already prevalent since sometime in US, where now almost 50 per cent of employees in BPOs and KPOs work from home. In India, the share of such employees working from home could go up to 30-40 per cent in the next 5-10 years.

Nonetheless, there are certain concerns raised over issues like privacy and security in some KPOs. However, the salaries do differ to some extent for employees working from home. If the company is not required to offer much of the infrastructure like PCs, internet and some softwares to the employees working from home, then they do receive some incentives in return.

The BPO/KPO industry in Gujarat had pegged a turnover of around Rs 1,000 crore in financial year 2007-08 and is expected to grow by another 10 per cent.

Source: Business Standard

dhilipkumar

Hi  dwarakesh

it is a good, and informative post..

keep posting....

dwarakesh

Protest ends as Wipro goes ahead with hiring

A week long hiring drama came to an end, as Wipro announced that it will hire around 13,500 engineering graduates as planned earlier. The IT major, had faced scrutiny in West Bengal, after the company offered BPO jobs to students who were earlier hired in the IT segment.

After the protest, Wipro called for a press conference, where Pradeep Bahirwani, Vice President, Talent Acquisition, Wipro Technologies,  in a jiffy said, Of the total 13,500 campus offerings made across the country last year, we have taken 3,700 of them so far, while the remaining (9,800) have been told to wait for their turn to join,"

However, later Bahirwani said "There is an option for engineering graduates to join our BPO division as technical support engineers. The technical support role needs engineering graduates, and that the company would have to hire fresh engineers from outside, if it had not made this offer to campus recruits.

Also, mentioned that more than 95 per cent of the engineering graduates have already accepted the option of working in Wipro's BPO centre in Kolkata, and there will not be any change in the salary package for those opting to join Wipro BPO. These graduates will make anywhere between Rs 2.75 lakh and Rs 3.25 lakh per annum.

sajiv

IT sheen leads to lesser no of Civ Ser aspirants

Growing job opportunities in IT and ITES sector has led to a decrease in the number of Civil Services aspirants, even as the general aptitude of those who were appearing for the tests were not upto the mark, a Union Public Service Commission (UPSC) member said.

The aspirants generally lacked in-depth knowledge, analytical and communications skills, N Balagurusamy, member, UPSC, told reporters, after inspecting the Civil Services Main Examination 2007, held in a city school.

"Most of them lacked things like in-depth knowledge of subjects, ability to logically analyse and solve problems and the most important communication skills".

"The communication skills are very weak and the overall quality of aspirants is not upto the level of our expectations," he said.

He also said that the growing employment opportunities in South India, especially in the field of IT and BPO, had resulted in diminishing number of civil services aspirants from the region.

This year in the country, 3.2 lakh persons had submitted applications for the exam. Around 1.2 lakh took the preliminary test, while only 9,300 appeared for main exams.

Stressing the need for higher education, he said students should be prepared for challenges like civil services at schools and colleges.

Last year 23 per cent of selected candidates were from engineering background while 15 per cent from medical background.

"They get through easily because of strong (educational) foundation," he added.

On the attrition rate in the services, he said that only about five per cent of them quit for various reasons, including offers from private sector.

Balagurusamy also found that not many aspirants knew there were 23 options in the civil services.

"There are all kinds of services available in the UPSC, for candidates from almost every background, ranging from medicine to engineering to economics," he said.

There were services such as Indian Audit and Accounts Service (IAAS), Indian Ordnance Factories Service(IOFS), Indian Railway Traffic Service(IRTS), Indian Defence Estates Service(IDES) and Indian Information Service(IIS) among others.

"Successful candidates generally prefer Indian Foreign Service(IFS), Indian Administrative Service (IAS) and Indian Police Service (IPS)," Balagurusamy, also former Vice-Chancellor of Anna University, said.


sajiv

IT caught in slowdown web

Mumbai: The economic slowdown has brought about an array of worries for Indian IT players. As the budgeting season arrives, companies assume wait and watch situation to see what their international clients will decide. Moreover, only players with strong cash flows will be able to sustain the onslaught of the slowdown. Others will have to cut costs drastically or borrow.

Industry analysts feel this year, due to the economic downturn, the budgeting for IT spend might get delayed by a couple of months. There will definitely be price revisions. Already CLSA has mentions that it expects a 4% downward revision in Infosys's billing rates.

As far as spending for new developments and new projects are concerned, the companies might come out with short-term budgeting and review and revise it over time depending on the situation.

As much as 70% of budgeting done by the companies is on the non-discretionary front, and the rest 30% is done for new projects and developments. "The budgeting for non-discretionary stuff is likely not to get affected. However, the IT sector will definitely get affected as far as the new project developments are concerned," commented Ganesh Natarajan, chairman, Nasscom & global CEO, Zensar Technologies.

Discretionary budgets however, will be cut drastically. Abhiram Eleswarapu of BNP Paribas Securities India mentions in his report, "We expect Indian players will face heavy discretionary spending cuts in FY10 as clients tighten their purse strings given our projections for an impending recession. Indian companies need to quickly broaden their client focus to sustain growth, which we see as unlikely."

Hence, companies could well take the short term budget route. "During the current market situation, it is highly probable that the clients might come out with short term budgets, and review and revise their spending depending on the situation," Natarajan added.

The Indian IT companies have already seen new projects getting delayed by the clients during last 4-5 months. However, as most industry experts feel that the economic downturn will go on for the next 6-9 months, the short term budgeting, if happens, will definitely put the companies in a difficult situation. Thus, it is predicted that this year the IT industry will grow at the of 21%-24%, which is 5%-6% slower as compared to last year's growth rate, which was around 29%.


dwarakesh

IT cos with BPO arms to steal the show

At a time when the global financial meltdown is staring the Indian IT-BPO industries in the face, a market research survey suggests that leading software services firms having back-office operations are likely to reap the rewards in the BPO market.

The survey report from research firm Datamonitor says that companies like TCS and Cognizant accounted for almost 80 per cent of the total value of large BPO contacts awarded in the last 12 months with nearly 55 per cent of all big BPO deals being signed by IT companies with BPO arms.

"While the BPO players did account for 44.7% of all announced deals, their cumulative contract value reflects only 19.5% of overall deal value," said Vamshi Krishna Mokshagundam, analyst with Datamonitor India adding that "BPO services are being increasingly signed on as part of a bigger IT services contract."

The largest BPO deal in recent times came from Citigroup which sold its BPO arm to TCS for a whopping 2.5 billion dollars. The deal is noteworthy from the point that a multi-billion dollar BPO deal went to an IT services player and also that TCS was keen on acquiring the asset despite questions surrounding Citigroup's own financial stability, says the research firm in a press statement.

Cognizant Technology Solutions, a healthcare and life science specialist, picked up a 95 million dollar deal for clinical data management from Astra Zeneca, in what is seen as one of the biggest publicly announced deal in the KPO industry.

The revenue data also tells its own tale with Infosys growing its IT services revenue from 931.5 million dollars to 1101 million dollars between October-September 2007-08 while its BPO revenues grew from 53 million to 72 million dollars in the same period, which was almost double the growth in percentage terms over the IT growth.

dwarakesh

Infosys CEO passes on savings mantra to staff

A dollar saved is a dollar earned seems to be the mantra of success shared by Infosys Technologies CEO Krish Gopalakrishnan with his employees as the software major has asked each member of its staff to individually cut costs by ten dollars.

A news report published in the Economic Times said Gopalakrishnan made this point in an internal circular to all employees asking them to identify a savings of ten dollars as a one time effort which would translate to a million dollars across the company.

"I urge each one of you as a key stakeholder of the company's success, to examine your work environment and look at opportunities that will optimize utilization and control expenditure. What may appear to be an insignificant saving at the ground level, may well add up to substantial savings when aggregated at the regional or global level," he said.

Pointing out that the recession could last for a longer period than initially imagined, the Infosys CEO said this necessitates a re-evaluation of corporate priorities and setting up of fiscally responsible measures that will ensure sustainability for the next 12-18 months.

The company has listed out four key objectives that include increasing billings and utilization of employees, enhancing revenues and margins, identifying cost reduction measures and controlling expenditure and optimizing return on investment.

dwarakesh

Offshoring to hit IT biggies

Top Indian tech firms such as TCS, Wipro, Satyam and HCL will see their earnings before interest, taxes, depreciation and amortisation (EBITDA) margins, a measure of operating profit--plunge below 20 per cent over the next three years, as these companies move more information technology projects to India, and align their operations with rising wages.

Leading outsourcing customers such as GE, Royal Bank of Scotland and Bank of America plan to increase their offshore outsourcing in order to lower their cost of managing IT in the US and UK, where billing rates are more than twice of what can be achieved by sending work to offshore locations such as India.

HCL Technologies is expected to see its EBITDA decline by half from 22.2 per cent in 2008 to 11.2 per cent in 2011, country's biggest software firm TCS could see its margins go down from 26 per cent last year to 18.2 per cent over next three years, according to Anand Rathi Research.

Country's third biggest tech firm Wipro is also expected to see its EBITDA decline from around 20.1 per cent last year to 13.5 per cent by 2011, the brokerage firm said.

Infosys is expected to see its EBITDA decline from 31.4 per cent to 23.6 per cent by 2011. A large proportion of Indian tech firms' costs are rupee-denominated, and at a time when the revenue growth (primarily in US Dollar) is expected to be lower, their rupee costs will not see any significant decline. Moreover, the rising wage costs are also expected to impact the margins.

In their November report, Anand Rathi analysts Tarun Sisodia and Naushil Shah said that while revenues for the top tech firms will grow at 15 per cent during next three years, "the impact on EBITDA is expected to be more severe just 2 per cent growth."

dwarakesh

Vietnam aims to fix struggling software industry

Vietnam has held a comprehensive national workshop on the state of the country's nascent IT sector.

Participants highlighted some of the shortcomings currently plaguing the industry, including a lack of human resources, poor communication skills, high telecom service charges and a serious shortage of qualified managers.

Professor John Vu, chief engineer of the Boeing Group IT centre, recommended that Vietnam promote potential IT projects based on ability and skill, rather than focusing on the bottom line, or low-cost factor.

Dr Le Hoang Minh suggested that the software industry would benefit from the creation of government investment funds. The director of the Software Technology and Digital Content Institute also emphasised that software companies had yet to receive financial support from the state for "adventure investment".

IT Agency chief Dr Nguyen Anh Tuan explained that Vietnam's policy on technology remained a "combination of the strategy of protecting domestic industries until they are eligible for competition". However, Nguyen noted that after joining the World Trade Organization, trade barriers and the majority of protectionist polices were lifted. As such, local businesses were unable to directly compete with multinational groups in local and international markets.

Despite these difficulties, Vietnam has still managed to attract the attention of Japanese IT corporations seeking a potential outsourcing hub. The Asian island currently shifts 17 per cent of its outsourcing projects to Vietnam, generating approximately 10-15 billion ($101-152 million) per year. Hoang Le Minh, a high-ranking government official, confirmed that the country planned to increase its outsourcing capabilities.

In addition, a number of Taiwanese PC firms have announced plans to establish a presence in the country, including Compal, Hon Hai Precision and Wistron Corp. International companies such as Canon, Sun and BT Frontline have also recently expanded their presence in the country.

dwarakesh

US shed 1.2 million jobs in last three months

Figures released by the US Labor Department showed that 533,000  people were laid off in November, bringing the total of jobs lost in the last three months to over a million. The figures are the highest for over 30 years.

The job losses were large and widespread over a number of major industry sectors, and the unemployment rate now stands at 6.7 per cent, the Labor Department said.

Job losses over the last three months have averaged at 419,000 per month, and two thirds of the job losses were in service providing sector. In the first eight months of 2008, job losses were mostly in the construction and manufacturing sectors.

Retail trade employment fell by 91,000 in November and in total 10.3 million people were unemployed, with 2.2 million of the unemployed being out of work for 27 weeks or more.

US secretary of Labor Elaine Chao had this to say about the figures: "Today's report underscores the urgent need to stabilise financial markets, ensure access to credit and create a positive environment for job creation."

dwarakesh

US job losses mount as economic picture worsens

Record numbers of homeowners are falling behind on mortgage payments and the U.S. economy is losing jobs at an alarming rate with companies big and small slashing their work force.

A half-million American jobs disappeared month, the worst mass layoffs in more than three decades, as the nation spiraled downward in what could be the hardest hard times since the Great Depression.

Bush administration officials said Friday night that the White House is considering telling Congress as early as next week that it wants to tap the unused $350 billion of the financial industry bailout. It was not immediately clear how the administration might use the money.

General Motors, one of the Big Three automakers that went to Congress this week for a second time with hat in hand, announced it was cutting even more jobs.

"The economy is in a free fall," said Richard Yamarone of Argus Research. "It is as if someone flicked off the switch on hiring."

Despite the gloom, investors found a silver lining, betting that so much bad news would force fresh government action to revive the foundering economy. The Dow Jones industrial rose 259 points.

But economists, staring at 533,000 lost jobs, were anything but hopeful. Since the start of the recession last December, the economy has shed 1.9 million jobs, and the number of unemployed people has increased by 2.7 million -- to 10.3 million now out of work.

Some analysts predict 3 million more jobs will be lost between now and the spring of 2010 -- and that the once-humming U.S. economy could stagger backward at a shocking 6 percent rate for the current three-month quarter.

"It's a mess," said Mark Zandi, chief economist at Moody's Economy.com. "Businesses, battening down the hatches, are concerned about their survival and are cutting workers."

President-elect Barack Obama said the crisis "is likely to get worse before it gets better," and no one was going to argue that point. Economists predicted the unemployment rate, which rose to a 15-year high of 6.7 percent in November, could soar as high as 10 percent before skittish employers begin hiring again.

The jobless rate would have bolted to 7 percent for the month if not for the exodus of 422,000 people from the work force for any number of reasons -- going back to school, retiring or simply abandoning job searches out of frustration. When people stop looking, they're no longer counted in the unemployment rate.

The rate was at 4.7 percent just one year ago, 6.5 percent in October.

Employment shrank in virtually every part of the economy -- factories, construction companies, financial firms, accounting and bookkeeping, architectural and engineering firms, hotels and motels, food services, retailers, temporary help, transportation, publishing, janitorial and building maintenance, and even waste management. The few fields spared included education, health care and government.

The United States -- already in recession for a year, may not be out of it until the spring of 2010 -- making for the longest downturn since the Great Depression of the 1930s, economists are now saying. Recessions in the mid-1970s and early 1980s last 16 months.

Unemployment peaked at 10.8 percent in 1982, terrible but still a far cry from the Depression, when roughly one in four Americans were out of work.

That said, more pain is certainly in store. Fresh evidence:

A record one in 10 American homeowners with a mortgage was either at least a month behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association reported.

General Motors, already pleading with Congress for billions of dollars to survive the month, said it would lay off an additional 2,000 workers as it cuts shifts at three car factories starting in February due to slowing demand for GM cars.

President George W. Bush, who used the word "recession" for the first time to describe the economy's state, pledged Friday to explore more efforts to ease housing, credit and financial stresses.

"There is still more work to do," Bush said. "My administration is committed to ensuring that our economy succeeds."

President-elect Obama said the dismal job news underscored the need for forceful action, even as he warned that the pain could not be quickly relieved.

Employers are slashing costs as they cope with sagging sales in the U.S. and in other countries, which are struggling with their own economic troubles.

In recent days, AT&T Inc., DuPont, JPMorgan Chase & Co., as well as jet engine maker Pratt & Whitney, a subsidiary of United Technologies Corp., and mining company Freeport-McMoRan Copper & Gold Inc. all have announced layoffs.

Tom Solso, chief executive of Columbus, Ind.-based manufacturer Cummins Inc., said Friday the company planned to cut 500 jobs, or about 3.5 percent of its work force despite other cost-cutting moves such as temporarily shutting down plants, shortening work weeks and extending holiday shutdowns.

Fighting for survival, the chiefs of Chrysler LLC, General Motors Corp. and Ford Motor Co. returned to Capitol Hill Friday to again ask lawmakers for as much as $34 billion in emergency aid.

Workers with jobs did see modest wage gains in November. Average hourly earnings rose to $18.30, a 0.4 percent increase from the previous month. Over the year, wages have grown 3.7 percent, but paychecks haven't stretched that far because of high prices for energy, food and other items.

Federal Reserve Chairman Ben Bernanke is now expected ratchet down a key interest rate -- near a historic low of 1 percent -- by at least a half-percentage point on Dec. 16 in a bid to breathe life into the moribund economy. Bernanke is exploring other economic revival options and wants the government to step up efforts to curb home foreclosures.

Treasury Secretary Henry Paulson, whose department oversees the $700 billion financial bailout program, also is weighing new initiatives.

Obama, who takes office on Jan. 20, has called for a massive economic recovery bill to generate 2.5 million jobs over his first two years in office. House Speaker Nancy Pelosi, D-Calif., has vowed to have a package ready on Inauguration Day for Obama's signature.

dwarakesh

US auto crash likely to hit Indian IT firms

The problems facing the US automobile industry as a result of the meltdown of US banks will have an impact on the growth of some Indian IT companies, say analysts.

According to the analysts, firms such as Satyam Computer Services, TCS, Wipro and Infosys could be hit by delayed payments and a freeze in contracts as their major customers in the auto sector face the threat of bankruptcy.

The top three US automakers - General Motors (GM), Ford Motor and Chrysler - are seeking a bailout from the US government. Even if they get it, they will have to bring down their IT expenses by more than $1.5 billion a year. And future business proposals are likely to come with demands for price cuts, which IT companies will be forced to go along with, suggest analysts.

Gartner VP in the advisory service manufacturing group Thilo Koslowski said, "To cut costs, auto companies would shrink in size to trim their operations. Some of them will shut down a few plants. This means reduction in operational IT spends." Companies are also likely to curb expenditure on new IT initiatives, referred as discretionary spends.

According to Edelweiss Capital's IT analyst Viju George, Satyam Computers will be worst hit by the slackening on IT projects from the auto industry, as it earns five to six per cent of its revenue from the automobile sector, providing services to GM and Ford Motors. Wipro will experience a minimal effect, since its dependence on the auto sector is modest, having GM as its only major client. TCS's exposure to the US auto market is also limited, with just Chrysler as its client.

Infosys, however is likely to feel the pain, as a good portion of incremental deals won by Infosys in the past seven or eight quarters have been in manufacturing.

dwarakesh

HR bosses prefer to quit than fire

As corporate India lays off staff in a slowing economy, top human resources (HR) executives at many companies are switching jobs, some of them to avoid the unpleasant task of sacking workers. This, even as a few companies are on the lookout for HR professionals with a skill particularly useful in tough economic times: the ability to fire employees while still keeping the morale of the organisation high.

"Either you stay at a firm and carry out the dirty job of sacking people and then, wait for your own turn, or move to a safe place," said the HR head of large multinational company, on condition of anonymity. Vibhav Dhawan, managing partner of Positive Moves Consulting, said several organisations are evaluating the effectiveness of their current HR leadership in coping with the economic downturn.

"During a downturn, the demand for high-quality, talented HR leaders sees a significant spurt because of the crucial crisis management role that HR has to play, either in the form of delivering bad news to employees or keeping the workforce productively motivated and engaged despite the stress at the workplace," he said.

Uday Chawla, a partner at executive search company Transearch, says three large companies have given him the mandate to look for new HR heads. Another executive with a prominent search firm, reluctant to come on record, told ET that he has a similar mandate from four big companies. "This is the first time that I am handling the mandate for four HR chiefs at a time."

In some cases, former HR heads have just got back their jobs, replacing the incumbent: Lupin's Diwakar Kaza returned after Rajan Dutta quit a few months ago and Ranbaxy's Udai Upendra made a comeback following the exit of Bhagwat Yagnik.

Some are making the move simply in search of greener pastures. N Balachandar, who quit as vice-president of GE Money Asia in Tokyo a few months ago, is now joining a pharmaceutical company. People familiar with the development say Mr Balachandar resigned because his workload had come down. Mr Balachandar, though, says his decision was only influenced by his wish to return to India.

Amitabh Ganguly of Delhi-based realty firm Ansal Properties and Infrastructure, which cut workforce by nearly a tenth, quit a few weeks ago to join a rival property firm. ICICI Prudential HR head Vasant Sanzgiri has left the financial services sector to join a brick-and-mortar enterprise.

dwarakesh

Employers plan to slow hiring further: Manpower

Employers globally expect to slow their hiring in the three months to March, a quarterly survey by Manpower showed, adding to the pain from the financial crisis that has already put much of the rich world into recession.

The staffing firm's quarterly survey of over 71,000 firms in 33 economies--coming a few days after a bleak US jobs report--showed employers
in 30 of them expect weaker recruitment, noticeably in the Asia-Pacific region.

"The vast majority of employers are telling us that they will take a 'wait and see' approach before hiring or further reducing staff," Jeffrey Joerres, chairman of Manpower, said in a report.

"Unless they see more positive economic signals ... it will be a rougher road for job seekers." Employers in all but three economies surveyed--Canada, the United States and Switzerland--expect to slow the pace of hiring from the final quarter this year, Manpower said.

Singapore and Taiwan were among the 21 economies that saw employers reporting the weakest hiring plans in the survey's history, with those planning to job cuts outnumbering those expecting jobs to increase.

The seasonally adjusted net employment outlook index--which measures the gap between employers who plan to add jobs and those who expect to cut them--showed negative readings in those economies, as well as in Britain, France, Italy, Spain and Ireland.

The US net employment outlook was up one point at 10, marking the first increase in five quarters, but it was down from 17 a year ago, illustrating the US job market slowdown.

The Labor Department said on Friday US employers axed 533,000 jobs from payrolls in November, the most in 34 years, as the year-old recession hammered the economy, and the unemployment rate hit 6.7 per cent, the highest since 1993.

Outlooks in 24 other economies including Japan also declined from the same quarter a year before.

dwarakesh

Tech firms rooted to fixed contracts

Leading IT companies are moving in to shore up their bottom line against further losses of contracts and blunt the effect of the plummeting rupee by increasing their share of fixed contracts as opposed to man-hour based billing.

Industry sources said that while man-hour based billing has been resorted to by Tier-II and -III outsourcing companies into the third quarter of the current financial year, the larger players are chasing fixed contracts even more in the face of deteriorating global economic conditions.

TCS, Wipro and Infosys have foreseen uncertainties in the American markets, which fetches roughly half of their revenues, much of it from banking, financial and insurance support services. Infosys Chief Executive Officer Kris Gopalakrishnan reportedly expects the economic slowdown to last between 12-18 months.

Infosys Chief Operating Officer and member of the Board, S D Shibulal, noted that fixed contracts are desirable both from a client's perspective as well as for the company. "For the clients, in these times of cost and competitiveness pressures, fixed-price contracts allow them to firm up their commitments and help bring in predictability into their IT spends....For us, it allows us to extract internal efficiencies and share the benefits with the clients without impacting the rates."

Manish Dugar, chief financial officer of Wipro Technologies, said that as a concept, fixed priced contracts provide the comfort of a fixed fee for defined outcome. "To Wipro, it provides an ability to optimise delivery and resources," he said.

Noting that there is no perfect mix between fixed- contract versus per man-hour billing, Shibulal said, "Ability to make a project fixed price depends on the type of project, maturity of the service, concreteness of the requirements as well as the strength of relationships."

Over the last five quarters, Wipro has improved its proportion of revenues from fixed-price contracts from 24.6 per cent in the first quarter of 2007-08 to 31.6 per cent in the second quarter of 2008-09.

Wipro currently has 31.6 per cent of its revenues coming from fixed-price contracts, and sees significant headroom to increase it further, Dugar said. He added that the Bangalore-based outsourcing company stands by its guidance for the third quarter of the current financial year based on exchange rates prevailing at the end of the September quarter.

The current downturn is intensifying the search for non-linear growth, say industry watchers. Leading IT companies have deepened their focus on emerging industries like the music, media and entertainment, which hold forth new growth opportunities in digitisation and archiving, print publishing, pre-press services, online information services and digital advertising. Products will be another growth lever.

Dugar said that Wipro's system integration and total outsourcing contracts in global markets involve a good proportion of the company's products business. "Products are central to our overall growth strategy and not necessarily driven by economic environment," he said.

In any case, the US financial services sector has been temporarily knocked out as the engine of growth for Indian IT services companies. But the impending consolidation in this sector will throw up ample process re-engineering opportunities. Herein lies the big opportunity for India to tap in the last two quarters of FY 2009, industry experts said.

dwarakesh

US clients renegotiate outsourcing deals, seek discount

The US recession may cost Indian outsourcing companies dearly. Many US companies who have outsourcing contracts with Indian partners are looking at renegotiating rate cuts. Companies like Best Buy, Visa and Conseco are seeking rate cuts anywhere in the range of 3-7 % says a report in the Economic Times.

"New contracts are being doled out at lower rates, along with discounts offered for the existing projects," the paper quoted an expert on the condition of anonymity. Also, new projects are being postponed for at least one year as customers look to reduce their operational costs. In some instances, customers are asking vendors to do more with same budget by renegotiating the scope of service level agreements.

Infosys chief executive S Gopalakrishnan also had admitted that customers were asking for discounts while offering more work. In some cases, outsourcing customers are also looking at vendor consolidation and letting fewer vendors do more work at lower rates.

While TCS works with Best Buy and Visa, Infosys signed a five year outsourcing agreement with the insurance firm Conseco in April this year. Conseco has shelved most of its new IT projects planned this year, Infosys' prospects could be hit depending upon its exposure to such projects said the paper. Wipro, reportedly has an outsourcing contract with Best Buy, but a company official declined to comment.

dwarakesh

Cognizant bags $100 mn US contract

Cognizant Technology Solutions, which competes with Indian offshore biggies such as TCS, Infosys and Wipro, continues to win new contracts from its existing customers, including Astrazeneca and Merck, even as the industry prepares to cope with lower information technology spend in top markets of the US and Europe.

According to sources, Cognizant has won a $50-100 million contract from one of its existing customers last month, which is among the top five American pharma companies. "This initiative involves new Oracle Fusion work, both application development and maintenance, and is described as 'a big engagement', with an estimated 200-400 employees working on the project that will start billing the second week of December," said James Friedman, an analyst at Susquehanna International Group (SIG).

The company has also won $100-million (total contract value) deals from Deutsche Telekom and Healthnet during the past few weeks.

During the past few quarters, Cognizant has won 5-6 deals every quarter, with each contributing up to $50 million in annualised revenues. "In the past few months, Cognizant hired away a number of group managers from competitors. Some of the deal flow may be attributed to these new employees, many of whom brought clients with them," Mr Friedman added in his report.

Cognizant, which serves leading drugmakers such as Astrazeneca, Merck and Pfizer, could not offer specific comments about whether the company has won any new contract with one of them. However, when contacted, an Astrazeneca spokesperson said the company has recently partnered with Cognizant.

According to Gartner, none of the Indian offshore players are among the top 15 service providers in Germany in terms of market share. Cognizant partnered with T-Systems, which has a market share of 16%, ahead of rivals IBM and Accenture with 6% and 3% of the market respectively.

dwarakesh

Recession in US may send more projects to India

A survey by the Offshoring Research Network (ORN) in collaboration with Duke University and research firm Price waterhouse Coopers found that the economic recession in the US could result in more projects being sent to India in order to cut down operational costs.

In the survey, nearly 40 of the 100 companies interviewed admitted that they would pressurise service providers to offer better contract terms to bring down costs. Some of the companies wanted the vendors to shoulder the upfront costs of contracts. Companies are even demanding longer project implementation periods.

The cost of acquiring new businesses is expected to increase with cutomers demanding more investment from the vendors. According to the study, captive operations of American companies are likely to focus on niche projects in addition to managing third party relationships on behalf of their parent organizations in India. Captives will have increased involvement with costs, and are likely to turn away from work, which can be outsourced to third party vendors.

Companies considered increased efficiency and cost reduction as top priorities. Nearly 12 per cent of respondents considered moving their captive operations to a provider or have already done so, according to the study.

dwarakesh

Credit Suisse to reduce outsourcing to Wipro

Credit Suisse, the global bank that recently announced layoffs of more than 5000 people, may also be cutting down outsourced work to Wipro, published media reports have indicated.

Wipro has about 1,400 people working on Credit Suisse projects and if work comes down several of these consultants may have to moved or benched.

The bank, which ranks among Wipro's top-10 clients, could go in for another round of layoffs over the next few days. Any reduction in work would adversely impact the Indian tech giant's revenues as well.

Another Indian IT company that could be impacted by the Credit Suisse meltdown is Cognizant Technology Services for whom the bank is their second largest client in the financial services vertical after JP MorganChase.

In addition to the exposure to Indian IT companies, Credit Suisse also has a captive BPO facility in Pune that employs 5000 people. The article claimed that when the last round of layoffs was announced, the bank's Asia-Pacific CEO Kai Nargolwala was traveling in India.

dwarakesh

IT slowdown will ease off next year

Global research firm Forrester says the tech slowdown will continue to haunt firms up to the third quarter of 2009. IT consulting and systems integration services will stagnate in 2009, while IT outsourcing will grow at a moderate pace in 2009 and 2010.

According to a new report, companies will turn to vendors that can help cut costs in the prevailing slowdown period, but growth in outsourcing revenues will remain moderate due to the use of lower-cost offshore resources and smaller scale outsourcing deals.

The research firm claims that even though the US market outlook is bad, it is better than the 2001-02 technology downturn. Andrew Bartels, the report's author and a vice-president of Forrester Research, said, "This time, computer equipment vendors will see declines of five to ten per cent  in US revenues on a quarterly basis, not the 20 per cent to 25 per cent drops of the early 2000s."

Assuming a decline in US GDP in the third quarter of 2008, the research firm has projected a growth of 1.6 per cent in IT spend for 2009. The slide will start to accelerate in the fourth quarter of 2008 and first half of 2009, and will start to show a weak recovery by the second half of 2009.

Federal government, primary production, consumer products and pharmaceuticals, chemicals and oil and gas, public services like healthcare and education, insurance, utilities and telecom will be among the industries that will provide business opportunities to IT vendors in 2009.

On the other hand, IT goods and services including financial services, consumer durables, construction and housing, retail, and industrial products  including the auto industry will cut down expenses on IT purchases.

The financial service industry, which has already cut down IT purchases by three per cent in 2008, is most likely to increase it by one more per cent in 2009. The construction industry is expected to cut purchases back by two per cent in 2008 and 2009. The retail industry will show no growth in IT purchases in 2009 and IT buying by industrial manufacturing will slow to one per cent in 2009, notes the report.

The report sees high-tech products, wholesale trade, media and entertainment, transportation and logistics to have mixed IT buying prospects.

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