Satyam plans to send staff on sabbatical to trim costs

HYDERABAD: 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 ET that the company could take a relook at the guaranteed component of the variable pay given to its employees.

“Employee-related expenses account for almost 55-60% of an IT firm’s total spending cost. They have tried to cut that expenses by scaling down hiring projections. Sabbatical programmes will help reduce costs further,” said Shah.
But the challenge would be in managing utilisation rates as they will have to manage projects with existing employees. This may put additional burden on them.

“Considering that most IT firms have a utilisation rate of about 75-80%, there is not much room left for manoeuvre. It may not be possible for firms to increase it beyond 85-90%. This, in another way, can be an indication of their order pipeline getting dried up and renewal of projects becoming difficult,” said another industry analyst.