TCS To Review Salary Hikes By Month-End

NEW DELHI: The country's largest software vendor Tata Consultancy Services (TCS) on Tuesday said it will review salary increment plans by this

month-end as signs of revival of demand in the sector get stronger by the day.

"There has been no hike in the current fiscal. The demand-supply situation, however, has improved over last year. We review it (wage hikes) along with the business plan for the year, which will be happening somewhere by end of February or in March," TCS Chief Financial Officer S Mahalingam told reporters on the sidelines of a CSI event here.

Indian IT sector was hit last year by the economic slowdown with companies world wide cutting their technology spends. This in turn, had led to many companies cutting jobs, freezing fresh hiring and no wage hikes.

Earlier this month, TCS announced that it would hire 30,000 people next fiscal, signalling that buoyancy was back.

Talking about expectations from the upcoming budget, Mahalingam said the industry, as a whole, wanted the extension of the tax holidays that are provided to IT firms under Sec 10A/10B of the Software Technology Parks (STP) Act.

He also asked the government to clear the ambiguities in various policies related to direct tax code and SEZs.

Is industry utilizing employees? Or exploiting?

Akanksha Prasad, CIOL

BANGALORE, INDIA: The recent Nasscom and other reports signal that the wave of recession is slowly receding. Companies are reportedly posting positive employeeutilization, but this is done on the cost of the employee. IT companies increased working hours, work pressure putting more stress on the employees, and in return, they were not eligible for over time benefits.

As Business Directory.com defines, employee utilization means "a method that attempts to maximize the efficiency of a company's employees".

Kris Lakshmikanth, founder CEO and chairman of Headhunters India, said that till 2007, the average employee utilization of the IT companies was less than 70 per cent. But 2008 onwards, the utilization went up to 80-82 per cent.

He said, "The factors responsible for this movement is reduction in workforce, utilization of the bench and increase in the work timings."

During the recent quarterly announcement, Wipro reported an increase in the utilization to 73.2 per cent in Q3 FY 09. HCL reported its employee utilization level moving up to 76.4 per cent in Q3 and that of Infosys came around 68.8 per cent in Q3. TCS reported the highest utilization rate of 81.1 per cent (excluding trainees) and 77.2 cent (including trainees).

Speaking to CIOL, requesting anonymity, a Kolkata-based IT professional, working in one of the leading IT companies in India, said, "Starting April 2009, our work timingswere increased by half an hour officially but one hour internally. If we worked for less than nine hours then we were penalized. But when we worked for 12-15 hours, we were not given overtime."

Lakshmikanth elaborated, "As per the reports the companies had increased the working timings by half an hour every day, which would come around an increase of two and a half hours in a week. This increase in the entire workforce can effect the total employee utilization to as much as five per cent."

Some of the IT companies reported to have increased their work timings from fifteen minutes to half an hour are TCS, HCL and Accenture.

When contacted these IT companies refused to respond, while others like Wipro and Infosys refrained from making comments saying that these timings had been around since long time.

According to them, these norms have been around for years, and it was just during the period September to December 2008 that they made compulsory office working of 9 hours 15 minutes and 9 hours 30 minutes respectively. In other words, every employee needs to work for around 8 plus one and half hour and on record, though they end up spending more than that.

Elaborating on the concept of increasing work timings, Praveen Bhadada, engagement manager, Zinnov Management Consulting Pvt. Ltd said, "For IT companies working on time and material basis, working extra hours means more revenues at the fixed salary of the employee, i.e. increased profitability. For fixed bid contracts, the work is executed faster – i.e. higher efficiency. Increased work hours reflect in increased overall productivity.

Another IT professional working in Bangalore reported that in order to show good performance and high efficiency, employees end up working for 12 hours, but still were not eligible to claim for the overtime.

She said, "Our targets were increased by double, in order to meet them under the deadlines, we worked for almost 12-14 hours. We were not only devoid of the overtime claim, but also the performance sheet did not reflect our hard work. This is the high time, when government should make strict labor laws and work timings."

Through an email, the spokesperson from the Union Labor Ministry said IT employees shall have a minimum of 48 working hours in a week but the maximum working hours have not been defined in the law and left to the discretion of the employer company. He said the department is examining the issue of working hours beyond 8 hours a day- without any extra monetary benefits.

Interestingly, none of these companies seem to bring back the gold old working experience of relief and luxury at work. Lakshmikanth opines that companies might continue with these policies for yet another six months, till they comfortably see not only recovery but growth.

Bhadada raised a very valid point that if the employee is stressed it can result in lower productivity and lower utilization as well. And this would soon become a challenge for the companies, perhaps one the reasons behind employee attrition.

TCS to hire 30,000 employees in FY-2011

10 Feb, 2010, 1300 hrs IST, AGENCIES

NEW DELHI: With improving business sentiment and revival in IT spends, hiring seems to be back in full swing at software firm TCS. Tata Consultancy Services, the country's largest software exporter by revenue plans to hire 30,000 employees in the financial year 2010-2011.

TCS CEO and MD N Chandrasekaran said, "China is a tough market for IT firms and the company was seeing business opportunity in Europe." The company is currently seeing an 8-10% growth in revenue from domestic operations and is eyeing a double-digit growth in the next two years.

Chandrasekaran said the company had signed a few large deals as well as a number of smaller ones.
"The financial services sector will drive growth. We expect good growth from retail, pharma and utilities," he said.

The company, however, expects a lesser growth from verticals such as telecom and manufacturing.

Chandrasekaran said the company will hike salaries of its employees in the coming fiscal, but did not give details. TCS, has not hiked wages in the current fiscal, but employees have received 150 per cent VA payouts in two consecutive quarters -- Q2 and Q3 of FY'10.

"We are on a path to hire 1,000 people. We have already hired 300," he said, replying to a query on hiring plans for the current fiscal. In Q3 of FY-10, TCS had made 7,692 net additions, compared with a net addition of 320 in the previous quarter.

Asked about the extent to which India would be affected by the US move to slash tax-breaks to outsourcers, Chandrasekaran said the matter is not an immediate concern.

US president Barack Obama last month had said his administration would "slash the tax-breaks for companies that ship our jobs overseas" and instead "give those tax-breaks to companies that create jobs in the country," which sent shivers down the industry's spine.

This is because the US accounts for almost 60 per cent of the IT exports from the country are to that market.

"The regulatory changes with regard to employment and outsourcing in any part of the world is something that we have to watch every day. You need to see how to align to that, but because of this, if you ask me if there is an immediate concern, then the answer is no," Chandrasekaran said.

Happy Times are Here Again – Indian Companies Set to Announce Pay Hikes

by sweta

After more than a year of money crunch, job loss and pay cuts; employees all over India have something to cheer about. As the corporates start recovering after the dreadful economy slowdown, the companies are gearing to reward their employees with bonus and pay hikes.

According to the latest report by Economic Times, employees across corporate India can expect a salary hike anywhere between 9 to 18 percent this year.

As per current trends, employees across sectors may get moderate to fat increments and salary hikes in the 9-18 percent range this year around. Pay-cuts, layoffs and heightened austerity measures are becoming a thing of the past, as it gets replaced with a buzz of promising bonuses.

The salary hike is expected in most companies belonging to telecom, retail, FMCG, automobiles and consumer durables sector. Last year a majority of companies had to bring down their head count. While many had resorted to a pay cut across the organisation, some had fired people in bulk.

Sandeep Chaudhary from Hewitt Associates was quoted as

“If we take a realistic look on expected salary hikes this year, it is surely going to be around 9-9.5 percent across sectors.”

He added, “Companies will focus on a more realistic approach towards salaries, as well as hiring.”

Where auto and mobile sector have been profitable and quite generous with their employees. While Maruti Suzuki is looking at a hike of 10-15 percent and an average bonus of about 100 percent this year, mobile giant Airtel is had offred an average bonus of 140-150 for junior level employees and 125 percent for senior level last year.

IT companies who have always been the highest paying sector have also decided on a good hike for its employees this year. Cognizant,SAP, VMware, Mahindra Satyam, TCS, Wipro, Infosys and Genpact are said to offer an increment of 7-15 percent at the operational level and 12-18 percent to the seniors. Wipro was among the first one to announce a hike of about 8-12 percent. At Stayam, employees can expect a hike anywhere between 8 to 20 percent and Infosys is looking at a salary hike in april even after a hike of 8% last year in October.

The job market which has been very slow for some time now has also started showing good signs lately. How do I know?

Haven’t you noticed the Naukri.com ad back on Television?

TCS, Wipro, Infosys, loosen purse strings to retain staff

BANGALORE: Nitin M, a techie in his 30s in IT capital Bangalore, still feels a chill run down his spine as he recalls the roller coaster ride his professional life took during the economic slowdown last year. In the pre-slowdown days, he belonged to the country’s most pampered workforce, when jobs were easy to come by and perks were splashed. The storm came soon enough. The smiles thinned out, and the number of colleagues he shared his expansive office space with too began to diminish. Sodexo coupons were cut, easy rides in private taxi cabs were replaced with journeys in crowded company buses. And salary hikes were a thing of the past. As a new decade unfolds, the wheel has come full circle. Nitin, who has recently landed a job with another IT company, said his previous employers had slashed increments during the recession. “Now, the company is giving a 40% hike to hire former employees back.”

Salary hikes in the offing IT employees and HR experts expect many companies such as Target, Cognizant, SAP, VMware, Mahindra Satyam, TCS, Wipro, Infosys, Genpact, Oracle, MindTree and Accenture to offer a pay hike of 7-15% at the operational level and 12-18% at senior levels. Abhinav Krishnan, an employee at VMware, the largest maker of software that lets computers run different operating systems, recently received a salary hike. This came as a big relief to him as he is his family’s sole breadwinner. “The company I worked with previously did not give me any hike. So I moved out, and my salary has now doubled,” says this 26-year-old employee, who was earlier with one of the world’s largest technology companies. Similarly smiles are back on the face of the 27-year-old techie working at advisory services firm Ernst & Young. He had planned to buy a car and a bigger house last year, but these dreams wilted away in the economic slowdown. “This year, I am planning to buy both. The company has announced a salary hike and a bonus of 7-10%. I am now in a better position to get a loan,” he said.

Attrition levels up
The improving market sentiments have also resulted in a rise in attrition levels, as companies have started to pay premium packages to hire skilled hands from other companies. An Infosys employee said attrition levels have gone up and most employees were going to rival firms like Tata Consultancy Services and Wipro, which are offering a 40% hike in salaries. “We are expecting a salary hike of 8% this April,” he said. He said that during the tough times, they had to put in six hours of work, which was considered a full day. “Now, spending 3.5 hours is considered to be a full day,” he said. Due to the economic meltdown, issues related to the work environment, employee benefits and innovative programmes were put on the backburner. Companies were not too transparent in informing their employees about key decisions taken in the organisation. Many employees said that some companies are exploiting the situation in the name of recession. Ajit Sivaraman, a 26-year-old techie, shifted to Tesco — one of Britain’s largest retail groups — to do the IT-related work there. The company offered him a 60-70% pay hike. He is now planning to buy his own home with an investment of around Rs 20-25 lakh. “I used to earn between Rs 1 lakh and Rs 3 lakh. Now I get Rs 3-5 lakh in the new job,” he said. He said his previous organisation even changed the cab facility to bus service for morning shift employees and offered staffers Rs 75 per day, if anyone wanted to come on their own. “It costs me Rs 200 per day to commute. They even cut our Sodexo meal card,” he said.

Talent reward programme
A Satyam professional said salary hikes were based on a model called ‘Smart’, with employees coming under the so-called ‘S-band’ receiving a salary hike of 20%, while those under the T-band received an 8% salary hike. He was expecting hike of 15% in April and plans to buy some property. “kI was earlier looking to move out as there was a lot of uncertainty and attrition levels were high. I don’t have plans to move out now,” he said. C Mahalingam, executive vice-president and chief people officer at offshore product firm Symphony Services, said his company was giving a salary hike of 7-8% to their employees and 8-9% hike to its top talent. “Companies are now hosting lunches and dinners at five-star hotels for their top talent. But the fun-and-frolic approach to keep employees happy may not come back in the near future,” he said. Mid-sized software and R&D services firm MindTree said it is focusing on a good communication network and is keeping employees informed about every development. “Employees do not expect free lunches and gifts. But they want to be treated as professionals, and their seniors to be more approachable,” says MindTree chief HR Puneet Jetli. IT services firm MphasiS has announced a recompense bonus for its staff which the company feels is possibly an innovative compensation model as it is based on the company’s performance and employee’s individual performance. “We have given a recompense bonus of 25% for the highest performer. For good performers, the bonus can be 15-25% higher than the average pay hike,” MphasiS chief human resources officer Elango R said.

According to Ajit Isaac, MD & CEO of IKYA Human Capital Solutions, many companies are planning a 12-18% fixed salary hike for senior employees and 5-15% salary hike for employees at the operations level. But captive centres, which were earlier paying lucrative salaries, won’t be able to keep the pace. “This is because outsourcing margins and billing rates are under pressure as a major chunk of outsourcing contracts are going to third party vendors,” he said. An IT employee at Keane, a technology services company, said she has received a salary hike of 10-12%. “Last year, there were lot of structural changes to combat the recession,” she said. The New Year has certainly brought some smiles back.

Tata Consultancy net profit up 34% on rising IT spends

`We have seen growth in all verticals,' says CEO N. Chandrasekaran.

Mr N. Chandrasekaran, CEO and Managing Director, Tata Consultancy Services, flanked by Mr Ajoyendra Mukherjee, Head, Global HR (left), and Mr S. Mahalingam, CFO, announcing the company's results in Mumbai on Friday. - Shashi Ashiwal

Our Bureau

Mumbai, Jan. 15

Riding on the back of a revival in IT spend across industries and geographies, the country's largest software exporter, Tata Consultancy Services, beat market expectations to report a 34 per cent rise in net profit for the third quarter ended December 31, 2009.

The Mumbai-based company - which counts bellwether firms' such as Citibank, Chrysler and GE as clients - recorded a net profit of Rs 1,824 crore against Rs 1,362 crore reported in the year-ago period.

Revenues went up by 5.1 per cent to Rs 7,648 crore (Rs 7,277 crore).

"We have seen growth in all verticals, including the troubled ones such as hi-tech and telecom. Geography-wise, we see a broader recovery not only in the US, but also in Europe, Asia-Pacific and India," Mr N. Chandrasekaran, Chief Executive Officer and Managing Director, told newspersons here on Friday.

He said the demand sentiments are improving every quarter. "We are seeing deal closures happening at the same pace that we used to before the financial crisis. Even discretionary spending (IT spends on new projects) is coming back as seen by the improvement in our consulting business," said Mr Chandrasekaran. (As a percentage of overall revenues, consulting now contributes 2.1 per cent to overall revenues as against 1.6 per cent in the previous quarter.)

Through improved operational performance and cost-cutting measures, TCS was able to expand its operating profit margin for the quarter by 176 basis points. Volumes grew 6.6 per cent, the highest in the last eight quarters. In the quarter, TCS added 32 new customers for its IT and back-office outsourcing services.

TCS' domestic business, which accounts for 8.5 per cent of its revenues, grew sequentially 8 per cent. The growth has come from sectors such as government, financial services and others.

"Volatility in domestic revenues continues to be a challenge for the company. Though we are not yet at a point where we can claim to have got the business mix right, we are still seeing growth," Mr Chandrasekaran said, adding that the domestic unit's profitability has also gone up sequentially.

n deals totalling over Rs 450 crore, TCS has been selected by two States as partner for the Accelerated Power Development and Reform Programme, said a press statement.

The energy and utilities domain, as a percentage of overall company revenues, now account for 3.4 per cent as against 2.8 per cent in the second quarter.

On the forex front, the company was able to pare hedging losses to Rs 35 crore as against Rs 113 crore reported in the previous sequential quarter. For the fourth quarter, TCS has $400 million of hedges at an average rate of Rs 45.7 to the dollar, according to Mr S. Mahalingam, Chief Financial Officer and Executive Director.

In US dollar terms, cross currency movements had a positive impact of 90 basis points on the company's operating margins, Mr Mahalingam told analysts in a conference call. On being asked about which way he expects the rupee to move, Mr Mahalingam told reporters: "We are preparing for further appreciation in the rupee and are positioning ourselves accordingly."

Given the increased buoyancy in the business environment, will TCS add to its business development and sales teams?

"We have been working towards bringing down our sales and general administration costs.our endeavour is to generate more revenues from the current sales teams," Mr Mahalingam said.

TCS has announced a quarterly dividend of Rs 2 a share. Ahead of the results announcement, TCS stock hit its 52-week high of Rs 799.2, before settling at Rs 791.80 (9.6 per cent higher than the previous day's close) on the Bombay Stock Exchange.

Protecting margins a big worry for IT firms

BANGALORE: India's leading software services companies are set to report a fall in profit margins for the last quarter due to a firmer local, though demand for outsourcing is improving in a global economy on the mend. The country's $60 billion sector, which manages complex computer networks to maintaining technology operations for clients such as General Electric and Citigroup, is back to its hiring ways and is also boosting salaries. "All the negatives in the world economy are not out of the system, but the confidence level in the IT sector is better now compared to the beginning of last year," said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. "The companies are now expected to come back on the growth path, but the key challenge is the currency rate."

A global recovery, recent deal wins and stable prices have brightened the outlook for Tata Consultancy Services and Infosys Technologies, India's top two IT exporters, after the global recession hit the sector last year. The rupee, which rallied to a 15-month high on Thursday, surging wages, and intense competition from global firms such as IBM, Accenture and Hewlett-Packard are seen as key risks for the sector. The rupee is set to rise another 4 percent this year on top of its 4.7 percent increase last year, with gains driven mainly by inbound portfolio investment, according to a Reuters poll. Indian tech firms are a magnet for thousands of young jobseekers with their sprawling campuses offering pizza and Subway outlets, golf courses and fitness centres to retain employees.

The software services sector gets more than half its revenue from the United States but companies are furiously expanding in Asia Pacific, Latin America and the Middle East to reduce dependency in the market and boost growth. Infosys, India's No. 2 software exporter, a trendsetter in the showpiece industry, kicks off the earnings parade on Tuesday, followed by sector leader Tata Consultancy on Friday and third-ranked Wipro on Jan 20. Infosys is expected to post its first year-on-year drop in October-December profit, as wage rises, a stronger rupee and higher sales and marketing costs dent margins. Valued at $32 billion, Infosys, which had previously frozen salary hikes and promotions for this fiscal year, said in October it would raise pay by an average of 8 percent this year for its employees in India. Markets will be keen on the company's comments on business and pricing trends, hiring and IT budgets of its overseas clients in 2010. Last month, Accenture reported a fall in first quarter earnings and gave a sales outlook for the current quarter that was weaker than analysts' expectations.

MARGIN PRESSURES
Infosys expects revenue growth in the fiscal year starting in April to be better than this year as a recovery in the global economy spurs investments by its clients, a senior official told Reuters last month. Consultant Gartner said major British and U.S. firms are focusing on a return to revenue growth in 2010 over cost-cutting, and information technology was central to their recovery strategies. Brokerage Angel Securities said Infosys profit margins are set to drop 245 basis points in Oct-Dec from the preceding quarter due to a 3.4 percent rise in the rupee and salary hikes. Tata Consultancy and Wipro should report margins fell 62 basis points and 38 basis points, respectively, it said. In the quarter, Tata Consultancy shares gained 21 percent and Infosys rose 13 percent versus a 14 percent jump in the sector index and a 2 percent rise in the broader market.

Telangana issue forces IT firms to eye neighbours

Political disturbance over the demand for a separate Telangana state is forcing information technology companies to shift. The process to shortlist office space in neighbouring states, like Tamil Nadu, is underway.

"Six companies, including top five in IT and operating in Hyderabad, want to shift before the end of January," Chennai-based Shriram Properties Managing Director M Murali said.

Software exports from Andhra Pradesh are projected to touch Rs 35,000 crore in 2009-10, and IT companies like Tata Consultancy Services , Infosys , Wipro , Tech Mahindra and HCL are present in Hyderabad.

"Besides Chennai, we have received enquires for leased properties in Visakhapatnam. All want office space for at least three-five years," Murali added.

"Two IT majors have approached us for 100 apartments on bulk lease, besides IT premises," said Chitty Babu, chairman of Akshaya Homes, a Chennai-based developer.

The IT department of Tamil Nadu confirmed that Chennai had received enquiries from Hyderabad-based IT companies. The Electronics Corporation of Tamil Nadu (Elcot), the nodal agency for IT in the state, develops special economic zones.

"We have been approached by IT companies, which are currently enquiring about availability of space in the state," an IT department official said. He added that Elcot was planning to organise roadshows -- from Hyderabad to begin with -- to promote IT in Tamil Nadu.

The move is bound to have its impact.

"About 15-20 percent of the 60,000-140,000 professionals employed globally by Tech Mahindra, Patni Computers, Satyam Computer, HCL, Wipro, Infosys and TCS globally are based in Hyderabad," P Phani Sekhar, fund manager (research arm), Angel Broking said.

J A Chowdary, managing director of NVidia Graphics India and president of The Indus Entrepreneurs, Hyderabad chapter, said if the decision on Telangana was prolonged, the IT companies would suffer. "Though we have requested the political parties to ensure law and order, students are going in for violent agitations by not allowing buses to ply and creating problems for people to reach offices."

TCS, Infy, Wipro losing contracts to Emerging rivals

BANGALORE: Emerging nearshore rivals, including Ness Technologies of Israel, CPM Braxis of Brazil and Mexico-headquartered Softtek are increasingly becoming attractive for top outsourcing customers such as GE, Citibank and several others seeking to work with local, specialised vendors instead of sending all projects to offshore locations like India.

At a time when India’s top tech firms Tata Consultancy Services (TCS), Infosys and Wipro are redefining their positioning as global services providers by growing their presence in the emerging markets of Latin America, Eastern Europe and Asia, they face stiff competition from these newer rivals.

“For many customers who already have significant presence in offshore locations like India, it’s a risk diversification,” said Jimit Arora, research director of outsourcing advisory firm Everest Group. “Some customers having 70-80 per cent of their offshore resources in India are realising that they need to look at the third category of suppliers that are local and niche,” he added.

Over the past two years, companies such as CPM Braxis, EPAM Systems, Ness Technologies, Softtek, Merchants and Spi Global have emerged as stronger rivals for Indian tech firms, especially while bidding for an outsourcing contract being fleshed out by a ‘first-time outsourcer’.

“When it comes to new business from the first-time outsourcers, these local suppliers may be gaining at the expense of multinational and offshore rivals,” added Amneet Singh, vice-president, global sourcing at the Everest Group. Mr Singh, along with Mr Arora, researched the six emerging suppliers and found that they have been growing at an average compounded growth of around 25% annually during the past few years.

Brazilian firm CPM Braxis, for instance, which counts GE, ABN Amro and Whirlpool as clients, reported revenues of around $567 million in 2008. One of the top four Brazilian banks, Bradesco, is also among the biggest customers for the company.

“Some customers, including Bradesco, would rather work with a local supplier, there’s nothing wrong. For large MNC customers, offshoring continues to be a priority,” said a senior executive at one of the top Indian tech firms. He requested anonymity because his company is currently in a financial silent period.

While these emerging outsourcing rivals are not yet in the big league of mega, multi-year contracts, they are still able to gain business because of their niche and local market expertise. On an average, these companies are able to win contracts worth $2-5 million in annual contract value.

Meanwhile, for Indian tech firms seeking to grow their base outside their home country, these emerging companies also offer potential M&A opportunities.

“Many emerging companies we spoke with believe they can become $1-billion company on their own. However, some admitted that they would be open to inorganic opportunities too,” said Mr Arora.

Indeed, emerging service providers in countries of Brazil, Argentina and Mexico such as Globant, which counts Adidas, Linked IN and Citi among its top customer and has around $100 million in revenues, are increasingly being approached by some Indian tech firms, officials told ET on condition of anonymity.

“We have had discussions with both Softtek and Globant, but I cannot comment any further,” said a senior executive at one of the tech firms exploring inorganic growth route for expansion in the emerging markets. Experts believe such fast-growing firms always make a good acquisition target.

“Given where these companies are in terms of their size and capabilities, they do make good acquisition targets for Indian companies,” agreed Mr Singh.

What makes these firms really attractive is their strong presence in some of the fastest-growing markets for software services. For instance, Ness generates about a third, or $170 million, of its revenues from Eastern European markets of Czech Republic, Slovakia, Hungary and Romania.

“One of the more interesting prospects in this region relates to government initiatives, particularly as it relates to a ‘digitisation’ grant for the EU worth more than 10 billion euro, with ‘must use’ clauses by 2013,” observed James Friedman, analyst at the financial broking firm Susquehanna International Group (SIG).

“Ness is competing actively for this work in a number of regions, and expects Eastern Europe may improve by H2 of 2010, still targeting $300 million from this region by 2012,” he added.

TCS to step up hiring as info-tech spending takes off

As demand picks up, pricing power will return. TCS has been winning deals.

---

— Mr N. Chandrasekaran, CEO of TCS

Adith Charlie

Mumbai, Dec. 30

In what could be a firm indicator of turnaround times for the IT industry, the CEO of India's largest IT services company said fiscal 2010-11 is likely to see his company step up the pace of hiring, give wage hikes, as well as increase capital expenditure.

“We are likely to hire more people next year ( vis-à-vis the current fiscal) and we have also increased the quantum of work done offshore. This means we have to create more facilities going forward,” Mr N Chandrasekaran, Chief Executive Officer and Managing Director of Tata Consultancy Services, said in an interview to Business Line.

Next year's capex for the $6-billion company is likely to be higher than the Rs 1,300 crore earmarked for the current year, a figure disclosed by the group chairman, Mr Ratan Tata, at the company's annual general meeting last year.

However, Mr Chandrasekaran would not provide concrete numbers as the company is still in the process of firming up its plans for the next fiscal, ahead of its third quarterly results that are to be announced on January 15.

This revival in IT spend is propelling TCS to firm up hiring plans for next year and it is being led by companies in the banking, financial services space across geographies.

Positive indicators

Though companies in sectors such as manufacturing, hi-tech, telecom and manufacturing are still ‘not out of the woods', there are enough indications of things revving up next year, said Mr. Chandrasekaran. “I believe that during the course of the year these sectors will turn positive and deliver growth. The good news is the decline (in these sectors) has stopped,” he said.

TCS expects 2010 to be a better year for the company and the IT industry as a whole. And the growth is largely going to be volume-driven.

“Short term, there may not be a pricing uptake; but I do not expect a (pricing) decline either. As demand picks up, pricing power will return,” said Mr Chandrasekaran.

The good news is that discretionary or optional technology spending among corporations also seems to be making a comeback, especially in the BFSI (banking, financial services and insurance) space. TCS Bancs (its financial products suite), which is “positioned against discretionary budgets”, has been winning deals across geographies, securing engagements even in geographies such as continental Europe that are yet to see an uptake, he said.

Better clarity

“Fundamentally, there is lot more clarity and there is a systematic way of approaching business from the customers' end vis-à-vis last year. We just hope that Europe as a geography also starts showing signs of recovery,” he said.

Starting January, TCS will approach campuses for recruitment for 2010-11. It may be noted that for the current fiscal the company has already given 24,888 offer letters for campus recruits, a good percentage of whom are expected to join, in a staggered manner through the fiscal.

Earlier, TCS had indicated that it had nearly frozen lateral hiring for the current fiscal. That too seems to be changing and the company has increased the pace of hiring laterals or experienced professionals.

TCS, which had clamped down on salary hikes this year, is likely to be more lenient next year. The company is internally huddled in discussions to see how much wage hikes can be implemented next year, said Mr Chandrasekaran.

For the quarter ended September 2009, TCS had reported a 29 per cent rise in net profit at Rs 1,642 crore against Rs 1,271 crore in the corresponding year ago period

Infosys set to get K'taka contract on T&D losses

The Rs 380-crore tender is part of the Accelerated Power Development and Reform Programme of the central govt.

Infosys Technologies, India’s second largest software services company, is close to winning a Rs 380-crore contract from the Karnataka government’s electricity supply companies, aimed at stemming transmission and distribution losses.

The contract is being awarded as part of the Accelerated Power Development and Reform Programme (APDRP) initiated by the central government.

Industry sources indicate that Infosys has emerged as the lowest from among 11 bidders, including Wipro, TCS and KLG Systems. A company spokesperson declined to comment.

Indian software service vendors are all vying for a piece of the Rs 10,000-crore of contracts under the APDRP, more so as this is a programme which could be expanded later. TCS and HCL, Infosys' big rivals, have won similar contracts on addressing T&D losses in other states.

Infosys has been stepping up its India presence during the past 18 months, setting up a separate India business unit. It has so far bagged three major projects in the government sector. Earlier, the company had won a project to set up and manage a central processing centre for the income tax department and one from the ministry of commerce to develop an eBiz portal to help provide one-stop services to industry.

The company has also bagged a pilot project to roll out an Integrated Coach Management System for the Indian Railways. Though the initial (pilot) project cost is small, its success will determine the schedule on when the railways will go for floating the final tender for the project, estimated to be Rs 210 crore.

The next biggest worry for Mahindra Satyam is staff exodus

BANGALORE | HYDERABAD: O R N Suresh, the 33-year-old manager working on a British Petroleum (BP) project at Mahindra Satyam, the decision not to take up job offers from rival Indian firms has not really been a smart move. It was quite risky, to say the least, to continue working in a company which was witnessing a few contracts move to rival IT companies. Infact, after BP decided to shift projects from his company to TCS and Wipro earlier this year, things were not the same at Mahindra Satyam.

“We never had any issues with the delivery of projects, and even though I had an offer to serve at Wipro for another oil firm some eight months ago, I thought Satyam offered better job satisfaction,” says Suresh.

As Mahindra Satyam tries its best to regain the faith of customers, employees and investors, the company faces a daunting task. While the global recession ensured that voluntary attrition remained abysmally low, the improving business environment will soon witness rivals wooing the talent which is available. And they are sure to poach in on the highly skilled hands who are willing to jump the fence at Mahindra Satyam.

Some 400 professionals who are at present working for BP at Satyam will soon become redundant after BP completely shifts the projects to rival TCS and Wipro over the next few months.

Apart from customer attrition, many Satyam employees are also realising that the new management’s relentless focus on pruning the costs means far less job security than nine months ago.

“The Rajus were extremely good at dealing with people, whereas the Mahindras have created a lot of discomfiture in the organisation by driving away our senior leadership and imposing their decisions on us. This makes us feel like outsiders. But for the fraud, an average Satyamite will still prefer Raju to the Mahindras as an employer,” said a senior employee who is currently working for banking and financial services customers at Mahindra Satyam.
The Satyam scam doesn’t seem to have dented the image of B Ramalinga Raju, especially among the employees, who still repose a lot of faith in him and the previous management.

A worsening global economic crisis ensured that there were no jobs available for those seeking better options in the market. For hundreds of Satyam employees who were on the bench, the new cost-cutting strategies and tactics were not really very employee-friendly.

“You cannot really blame the new management - even Wipro was forced to lay off many of it employees during the recession,” said another employee who is currently working at the company’s back office division. However, many of the employees feel that the new management is not able to show empathy to the present employees the way the old Satyam management used to.

Perhaps it is this disconnect between the employees and the management which will work in favour of other IT companies who are eagerly waiting to recruit skilled hands willing to jump the boat. “We always thought Satyam was an over democratic company. It was a friendly company where even those on the bench was treated royally. Tech Mahindra has adopted a hire-and-fire policy and the employee satisfaction levels are very low,” said an associate with the Citigroup project.

Meanwhile, one of the biggest worries which Mahindra Satyam has to face is its fading popularity as an employer. And, whenever business picks up, the company may lose out to rival companies in acquiring new talent given the image it has conjured up in the market.

“I will never recommend anybody to join Satyam. Firstly, from a $2 billion company, it has been reduced to a mid-sized IT player. Secondly, the new management is yet to visualise and comprehend the scale of Satyam’s operations, employee and customer expectations. It’s like a cafe owner buying Taj Krishna. Moreover, with no big projects on the cards, I do not think anybody should risk their career by taking up a job there,” said a Merrill Lynch project head.

Large multinational technology firms such as Accenture and IBM, apart from domestic rivals have already started their recruiting campaigns. “The management’s toughest challenge now is to retain the workforce they have. With Accenture and IBM conducting walk-in interviews every Saturday, more than a quarter of Satyam’s associates’ resumes are circulating in these offices,” said a Mahindra Satyam employee working for an insurance customer.

IT majors worried about cascading effect of Dubai crisis

MUMBAI/BANGALORE: As Dubai World, the emirate’s investment firm seeks more time to repay almost $60-billion debt, India’s top tech firms fear
that the once lucrative West Asia market for outsourcing can enter a prolonged recession and customers in other top export markets of the US and Europe may exercise more caution while making outsourcing decisions.

Tata Consultancy Services (TCS), Infosys Technologies, Wipro, HCL and Patni Computer Systems are among Indian tech firms serving telecom, banking and other customers in the West Asia region. Dubai, the biggest commercial hub in the region saw home prices plunge by nearly half from 2008 levels, reflecting the worst real estate slump during the global recession, according to Deutsche BankAG.

“Global confidence is coming back. We were hoping for more spends. But now the confidence of our customers is shaking. I expect they are going to be a bit more cautious about spends and will not open up so much. Budgets were getting firmed up in December—clients will now relook at the whole thing,” said a senior software executive with one of the firms that was looking at the West Asia and Africa as a growth markets. Publicly, though, few firms are willing to admit to these worries.

While Wipro counts Qatar Petroleum and Road and Transport Authority of Dubai among its top customers, TCS serves Saudi Telecom. Domestic rivals Mahindra Satyam also counts Dubai Municipality and National Bank of Dubai among its key customers in the region.
Wipro’s Anand Sankaran said the crisis was not entirely unanticipated as reports of people in Dubai abandoning their cars in airports because of the economic slowdown have been around for 9-12 months. “To mitigate this risk, we started looking outside Dubai,” he said. Wipro’s IT business in the West Asia is around $80 million and its Dubai business is 15-20% of it.

Apart from exposure to Dubai, the impact on companies could be lower IT spends from West Asia, which was perceived to be a growth market. Tech Mahindra had announced several wins from the West Asia and multinationals like CapGemini had appointed a partner-level executive to open up the market, as opposed to handling it from its UK office earlier.
But possibly more worrying are Dubai’s linkages to the financial world. “Dubai has a lot of financial connections and there could be a
ripple value on the dollar. Any imbalances in the economy could have potential impact on the stability of the dollar and IT spending as well. Further, it is a negative sentiment for the financial sector,” said Ganesh Natarajan, former Nasscom chairman and CEO Zensar Technologies.

“West Asia accounts for mere 1-1.5% of exposure for Indian IT. So the revenue risk is only to that extent. However, the indirect impact could be more severe. Because European and US banks have direct exposure to West Asia, increasing default risk will turn this industry to be conservative in allocating capital and in their spendings, including IT spending,” said Alok Shende, principal analyst, Ascentius Consulting.

“US banks had recently started coming out to of their hibernation, and since US and European banking industry have a significant pie of Indian outsourcing industry, the risk aversion could slowdown the pace of outsourcing,” Mr Shende added. Mastek CMD Sudhakar Ram, however, said the impact was only a second or third order impact, it would not be very major. “As it is, companies were spending only on keeping the lights on. So they cannot cut back on that,” he said. But if indeed customers continue to spend only on keeping the lights on (or in other words, only absolutely necessary spends), then the much-awaited recovery that IT firms were anticipating may be delayed yet some more.

TCS to hire about 25,000 in 2010-11

Indicating a revival of business opportunities, Tata Consultancy Services (TCS) has said that it will recruit about 25,000 people in 2010-11.

In 2009-10, the company has absorbed 1,500 in the second quarter and would add 8,000 more this quarter.

The IT major has said that it would send appointment letters to the remaining 15,385 candidates in the last quarter of the financial year.

At present, the company, which employs 1.41 lakh people, registered an attrition rate of 11.50 per cent for 12 months.

Addressing a press conference here on Friday, Mr Ajoy Mukherjee, Head (Global HR) of TCS, said if the number were as big as 24,885 the company had planned to induct this year, it would not be far away from that target.

Mr Ajoy Mukherjee was here in connection with Sangam, the company's annual interface with the industry and academic institutes.

“We are finalising the business plan for the next year. We are going to campuses as the students enter their eighth semester,” he said.

Mr N Chandrasekaran, Chief Executive Officer and Managing Director, has announced that it would fund 200 PhD students in computer science research, 40 each in the next five years, at various institutes.

“At a time when new technologies are changing business models rapidly, there is an urgent need for more focussed research to stay ahead of the learning curve. The TCS Research Scholars programme will help enlarge the research and development agenda,” he said.

Plan for verticals

Though the company had significant presence in several verticals, the company had decided to accelerate pace of growth in some other verticals in which it was having relatively smaller presence. “We are going to increase focus on pharma, aerospace, retail and utilities,” he added.

He said the company would continue to focus on the emerging markets such as Latin America, India and Asia Pacific and Caribbean.

Infosys to drive out of auto engg biz, focus on aerospace projects

MUMBAI: India’s second-biggest software exporter Infosys Technologies plans to stay away from top auto customers in its engineering services business and shift its focus from commoditised and price-sensitive projects.

Engineering requires a mix of programming and core engineering skills such as mechanical or civil, depending on the industry being serviced, and is billed at higher rates than traditional application development and maintenance projects.

“We have chosen to walk away from this (auto) industry because the work has become increasingly commoditised because of high competition. We are a premium services player and our contribution is value-driven,” said Valmeeka Nathan, vice-president and head of product lifecycle and engineering, Infosys. He said the company had chosen to de-risk revenues from this segment and instead focus on segments such as aerospace, which provides stability and visibility of revenues.

Some of the other focus areas for the company in engineering services will be sectors such as heavy engineering, hi-tech, energy generation, medical and apparel. Mr Nathan said aerospace contributed about 40% to the company’s engineering services revenues, with the remaining 60% coming from other sectors. “The contribution of the auto (sector) to our (engineering) revenues is minor. We do take on projects from auto clients but selectively,” he added.

“The nature of engineering services is different from software services, and requires a fairly different talent pool. Vendors have their own niche because it requires a fair amount of competency. It also doesn’t offer the same kind of scalability as the rest of the software business,” said Sandeep Muthangi, analyst with IIFL. “Even outside of engineering services, Infosys does not have much exposure to the auto sector,” said an analyst with a foreign brokerage.

With auto majors, General Motors (GM) and Chrysler, slipping into bankruptcy, the auto sector has been a trouble spot for IT vendors such as Tata Consultancy Services (TCS) and Wipro that service them. Revenues from the auto industry have declined and analysts said they could not comment on the current contribution of GM or Chrysler to the revenues of the IT majors.

However, on the sidelines of the recent Nasscom Global Engineering Leadership Summit, Regu Ayyaswamy, VP (engineering and industrial services), TCS, said that the company was seeing ‘some sporadic signs of growth’ from the auto industry.

Engineering services is expected to clock to $7 billion in software export revenues this year with over 50% of it coming from the semiconductor and telecom industry. However, by 2020 when engineering services revenues are expected to touch $40 billion - $50 billion, the auto sector is expected to hold its own along with sectors such as consumer electronics and aerospace.

Dell-Perot to introduce ‘pay-as-per-use’ model

NEW DELHI: Dell-perot Systems, which bundles hardware and software solutions for offering low-cost services to hospitals and other healthcare companies, plans to replicate its American model for gaining more business in India’s $12-billion domestic market.

The company, which is already offering its pay-as-per use service to healthcare customers in the US, signed a 10-year contract with Max Healthcare earlier this year, bidding against domestic rivals TCS and Wipro, for Rs 90 crore.

At a time when the US is preparing to spend almost $46 billion on modernisation of its ageing healthcare systems, and even the Indian government has aggressive IT-enabled programmes, tech firms such as TCS, Infosys and Wipro will have to compete against Dell-Perot and IBM.

“Historically there was a software and a hardware side to an IT service. Today, companies are bundling both service capabilities into one and offering it as an integrated IT solution. It helps in reaching out to the customer faster and reduce overall IT cost,” said Mr Fickenscher.

Cloud computing for hospitals and healthcare service providers is expected to reduce their overall operational and capital expenditure by up to 30-40%. Computing through cloud, or delivery of software business applications through a given network allows customers and users to use a service without owning any hardware infrastructure or software licences.

“We have launched this model in the US and it has been quite successful. It will take some more time to get these services into India, as it requires deployment of appropriate IT systems and training people on the same,” said Mr Fickenscher.

The company is already in talks with several other hospital chains in the country to manage and control their IT infrastructure. Going forward, Dell-Perot will also look at government projects in the heathcare space aggressively.

India is among the four major growth markets for Dell-Perot, the others being China, Europe and the Middle-East. The company feels that there is a huge scope of providing cloud computing services — IT services over internet — largely to physicians in India, as they usually do not have access to data centres.

The company is expected to launch cloud computing services in India, China and the UK over the next 12-18 months and Latin America subsequently.

Experts such as Diptarup Chakraborti, principal research analyst at Gartner said Dell-Perot will be a bigger worry in the overseas markets for Indian tech firms.

“Dell acquired Perot largely to cater to the US market where it was loosing out due to lack of complete product portfolio. Since Indian IT services Infosys, Wipro and TCS focus primarily on the US and European markets, Dell will give a tough competition to them in these markets considering that Perot System is the largest service provider in the healthcare space worldwide,” he said.

Britain’s National Healthcare Services (NHS) programme is another opportunity for Dell-Perot to replicate its cloud computing model.

“BT has an ongoing contract with the government to provide IT services, specifically to around 37 trusts/hospitals. We are a subcontractor to BT in that project. However, the model on which the IT solution will be based is yet to be finalised. BT is having conversation on the same with the government and will finalise it soon.”