Click to play videoMumbai: IT companies are up against a brick wall. They're facing strong margin pressures, 10 to 15 per cent pricing pressure, and cross currency volatility. And in these times, they have only one option left to them: Cut costs.
“We have to be extremely careful about how well we take care of our people and safeguard the best. At the same time we have to use this opportunity to trim our operations and bring our cost levels down so as to be competitive in the broader marketplace,” says ED & Joint CEO, Wipro, Girish Paranjpe.
To start with, some of them are tweaking working hours. Starting April, TCS will hike working hours from 40 hours a week, to 45 hours a week.
While TCS has not mentioned its billable hours, our calculations show that the higher work hours will increase its yearly billable hours by 6.25 lakhs. At an average industry offshore billing rate of $20 to 35 per hour, TCS could gain anywhere between $12.5-21.9 million dollars a year.
It is also looking at tweaking variable pay, which makes up 8 per cent of its revenues, and up to 35 per cent of an employee's salary.
“The variable compensation of the pay which is totally linked to the performance of the organisation plus the performance of the individual, we will re look at it from the point of view what the company can afford and what the company cannot afford,” says CEO, TCS, S Ramadorai.
Both Wipro and Infosys have told CNBC-TV18, that they are not looking at cutting variable pay, or hiking working hours just yet.
However, Hexaware says it will put 350 of its non-billable employees on the virtual bench, paying them just 50 per cent of their basic salary.
Selling, General & Admninistrative expenses are also under the scanner. Cutting down on travel, and, in some cases, aggressive depreciation of assets to increase cash flows are also being exercised.
While these measures may seem a little harsh, experts say they are a better alternative to firing people. And with the industry expected to recover only by mid-2010, these measures may prove fruitful in the long run.
(For updates you can share with your friends, follow IBNLive on Facebook, Twitter and Google+)
displayed with permission. Use of the CNN name and/or logo on or as part of CNN-IBN does not derogate from the intellectual property rights of Cable News Network in respect of them.