PRIORITIZING IT

Shashwat DC
Dataquest (Edition: March 31, 2008)

The term emerging has been derived from the Latin word, Emergere, where e stands for out, forth and merger means to dip. Literally, it would translate to coming out from dip/slide. The Oxford English Dictionary defines the verb emerge as: 1) become gradually visible or apparent. 2) Recover or survive a difficult period. 3) (Of an insect) break out from an egg, cocoon or pupal case. And from the verb emerge, we get the adjective, emerging. But all this is mere etymology (how the word originated) and one would wonder what the real significance of such deliberation is?

Indeed there is; the three aspects, as described above by the dictionary, are hallmarks of what we refer to as an emerging enterprise. The firm or the company is slowly getting credence in the marketplace and gaining recognition, it is surviving the onslaught of competition, and is trying to create an identity, which is not solely defined by its parent company.

What distinguishes an emerging enterprise is basically what we call fire in the belly it is trying to do different things or simply doing things differently. Stagnation is an anathema for an emerging enterprise, and growth is the only mantra. In this article, we talk about a few such companies, how they are deploying IT, what challenges they face, and what the key findings are.

Emerging or SMB?
Browsing through a magazine or a newspaper on any given day, one is very likely to come across some mention of the SMB segment either it will be a big company targeting this market (XYZ banks on SMB) or some report that talks about them (SMBs to spend XYZ crore). As the Indian economy continues its upward ascent and growth percolates to smaller towns and cities, a vibrant community of entrepreneurs is coming to the fore. These entrepreneurs had set up shop most likely in the License Quota Raj times and managed to survive the babudom days. But the challenges brought about by liberalization were just too much.

As the floodgates opened and foreign companies started selling their goods and services, the Indian customer too developed a taste and liking for professional services. For instance, if one wants to purchase a motorbike, the customer does not want to wait long, he wants everything, including the delivery of the motorbike, to be done in a day. Gone are the days when you booked a scooter and waited years to hear from the Hamara company. In this world of instant gratification, instant discontent is equally pervasive.

It is in such a scenario that emerging companies have to not only survive but also thrive. While it is a common practice to label such companies as SMBs, Dataquest thinks otherwise.

The term SMB lays a lot of emphasis on the size of the company, not exactly highlighting the nature of business. For instance, an SMB in the aviation industry, for instance, IndiGo or SpiceJet, would always be many times larger than a Tonic Media working in the digital advertising space. Whereas, when we talk of an emerging enterprise, it refers to a company that is not a leader in its space but is moving upward and would emerge as a challenger in some time. Thus, while emerging and SMB might refer to the same company, very often, they do not necessarily mean the same.

Also, SMBs in most sectors want to survive somehow. In India, many small companies aspire to be leaders of tomorrow, not a lofty dream considering that the game is still wide open, and the penetration levels are very low.

Strategic or Not-so-Strategic
Last year, the survey conducted on emerging enterprises by IDC, in conjunction with Dataquest, touched upon a very pertinent question. Is IT strategic? Sadly, the answer was in the negative, with over three-fourth of the respondents not considering IT as strategic. It was a big letdown considering the overwhelming numbers that were stacked against the notion.

The good news is that the trend seems to be changing, with almost all CIOs with whom Dataquest interacted, giving their thumbs up for IT. While many spoke about their troubles with higher management and the entrepreneurial boss, they confided that IT, nevertheless, was being regarded not only as integral but also important to the success of the organization.

Does growth propel IT, or does IT enable growth? In the present-day scenario, IT has become the backbone for every business. Nowadays, every company is using IT in some form or the other, feels Ketan Shah, associate director, IT, Angel Broking.

A clear indicator of the change is the fact that many CIOs agreed that convincing and getting commitment from top management, though still an issue, has become less challenging. The chief factor is growth. Unlike foreign economies, the Indian economy is growing at a rapid pace, and so are different sectors. This growth is facilitating much of the IT investments. As emerging companies go up the ladder of profitability, they increasingly realize the need to be more productive. And IT and productivity go hand in hand.

While IT adoption is a matter of a company’s business model; for instance, a brick and mortar company would not really consider IT as strategic; in newer segments, the role played by IT is almost critical. Nonetheless, one can safely say that these days business strategy is driving the IT strategy, Pradeep Pendse, dean, IT, LN Welingkar Institute of Management Development and Research.

IT plays a supporting role in the manufacturing segment, where the focus is more on heavy manufacturing machines than nimble computers. It is easier for top management to be convinced for the purchase of manufacturing equipment that have a direct impact on the topline than to invest in systems that add to the bottomline, says HS Sai, CIO, Thomson Press.

IT is still a service function in most manufacturing companies. Its basic role is to cut costs. Though not yet strategic, the shift toward it is happening, feels KP Parab, AVP, IT, Ion Exchange.

Getting the nod
Most emerging companies have roots in the entrepreneurial talent of a single person, someone who stepped out of the line and decided to pursue a path created by self. Usually, the single owner, while being aware of IT, does not realize the dominant role played by it. In such a scenario, it is harder for a CIO to convince the boss to invest in a firewall, whereas the owner is contemplating wall-to-wall air-conditioning. Indeed, quite many CIOs complain about this disconnect; more so as the ball firmly lies in the owners court.

The best thing about entrepreneurs is that they are a great bunch of business minds and visionaries who can often look into the future. If they are convinced about a business need, they would not mind spending any amount of money on it, says Ramesh Wahi, CIO, House of Pearl.

The big idea is to show tangible benefits to the CEO rather than talking in terms of obscure technical terms. It makes more sense to talk the business language in terms of RoI, profit, benefits rather than open source, SOA and WAN optimisation. To be able to convince the CEO, the CIO needs to understand the business needs of the organization and present his solution as a business case. One needs to talk in the language that is easily understood by them, says KS Bhattacharjee, CIO, XPS World.

 

DOT WANTS BLACKBERRY SERVERS IN INDIA

Joji Thomas Philip, New Delhi
The Economic Times | The Hindu Business Line | The Indian Express | 

DoT on Friday asked Canada’s Research In Motion (RIM)—the BlackBerry smartphone developer—to set up servers in India. This was conveyed at a meeting between DoT officials, security agencies, company executives, Canadian High Commission representatives and telecom operators.

Government sources said that operators like Bharti Airtel, Vodafone Essar, BPL and Reliance Communications, which offer BlackBerry services in India, supported the DoT’s demand. RIM has sought more time to respond to the DoT request, they added.

It’s also learnt that in the meeting, DoT officials had categorically pointed out to RIM that only emails between one BlackBerry device to another was under the scanner of Indian security agencies. A government source close to the development said: “RIM offers many services here. All of them are interceptable, except for emails sent between one BlackBerry device to another BlackBerry device. It is only this part we want to address.”

Friday’s meeting was the latest that DoT officials and security agency representatives have had with RIM executives to address security concerns associated with BlackBerry services. If RIM agrees to the DoT request, the company will have to migrate all data traffic originating from Indian mobile networks to servers located in India. At present, BlackBerry’s email traffic in India is hosted on RIM’s overseas servers (primarily in Canada), which cannot be lawfully intercepted by security agencies.

DoT was exploring the possibility of asking RIM to set up servers in India. Emails between BlackBerry owners in India bypass local networks and directly hit RIM’s servers in Canada. But a BlackBerry email accessed by an end user on a PC or handset passes through the Internet network in India, which is being monitored by security agencies. “We are already compliant with emails sent from BlackBerry to other devices and email addresses accessed on computers. It is only BlackBerry to BlackBerry that needs to be monitored,” said a source.

 

IT MAJORS GOT FEWER H-1B VISAS APPROVALS IN '07

Deepshikha Monga, New Delhi
The Economic Times

While the debate over Indian outsourcing firms making the most of H-1B visas rages on, Indian firms’ share of the temporary worker visas has actually come down by over 8,500.

Leading Indian IT companies Infosys, Wipro, TCS and Satyam received fewer H-1B approvals in 2007, as compared to 2006. For instance, top-ranked H-1B user Infosys got 4,559 visas for the financial year 2007 starting October 2007, against 4,908 in 2006. Similarly, Wipro, which got 4002 visas in 2006, received 2,567 visas in 2007.

While Satyam got 1,396 approvals in 2007, against 2,880 in 2006, TCS got 797 approvals in 2007, a drastic drop from 3,046 in 2006.

Allegations of foreign companies, especially Indian, using H-1B visas to replace qualified American workers surfaced last year when senators Chuck Grassley and Dick Durbin wrote to nine Indian IT companies, among the top 20 H-1B users in 2006 that accounted for 19,512 visas, 30 percent of the total 65,000 workers’ visas.

The senators questioned these companies on their usage of these visas and lay-offs in the US. The same companies, of which six now figure in the top 20 users for fiscal 2007, got about 10,927 visas, a drop of 8,585 over 2006.

It’s not that Indian companies are taking fewer workers abroad, usually for onsite deployment at the clients’ offices. Industry players claim they were unable to get more visas as more companies tried to stake their claim to the limited H-1B visas. Pro-H1B executives like Bill Gates have urged the US government to increase the cap on the visas.

Microsoft was the fifth-most active user in 2007, with 959 H-1B approvals to its name. Gates has urged the US Congress to increase the visa cap, citing his own company’s inability to hire as many foreign workers as it wanted to. “Last year, for example, Microsoft was unable to obtain H-1B visas for one-third of the highly qualified foreign-born job candidates that we wanted to hire,” he said.

The top H-1B users in 2007, in the order of usage, were Infosys, Wipro, Satyam, Cognizant (962), Microsoft, TCS, Patni (477), US Technology Resources (416), i-flex (374) and Intel (369). Of these, six including i-flex, which is based in India but owned by Oracle, are Indian firms.

In 2006, seven firms figured in the top 10, L&T Infotech didn’t make it to the list in 2007. Nasscom said the issue was not job loss by Americans but about skill loss occurring due to foreign workers going back to their respective countries after enhancing their skills in the US. “There is a technical skill shortage in the US,” said Nasscom president Som Mittal.

Meanwhile, Grassley has recently asked the US Homeland Security department as to the moves taken to reform the visa programme, which he said is being abused by foreign companies that bring in idle workers to the US and ‘lease’ them to other firms.

Counters a senior executive at an Indian IT firm, “People are not looking at the contribution of these H-1B workers at the technology level. The big picture is that we are working in a borderless world and people have to live with that.”

 

US RECESSION TO HIT INDIAN JOBS?

Neelima Mahajan-Bansal, New Delhi
The Times of India

As the fear of a US recession looms large, how will it impact Indian companies? Will it lead to belt-tightening and job cuts? While there are no easy answers to that, it is clear that while there isn't a doomsday scenario yet, dark clouds on the horizon.

IT companies will be the worst hit. "India as a product base will be in for a hard time," says Manish Sabharwal, chairman, TeamLease Services. "In IT companies, we are bound to see a reduction in headcount and blunted wage acceleration over next two years." Early signs of an impact in IT are visible. Says Vishal Chibber, head of HR at Kelly Services India, a staffing company and HR solutions provider, "The benchstrength in IT companies has reduced and in some cases, completely evaporated."

Typically, IT companies would keep a benchstrength of 20-25% but now they are putting as many people as possible on live projects. "Also, they are relying more on fresh hires rather than lateral hires to push the average salary cost down," adds Chibber.

Similarly, people graduating from engineering colleges already have deferred offers and your negotiating powers with employers are down if you have just 2-3 years of experience.

There are other sectors too that are bound to bear the brunt — primarily export-oriented industries like textiles, pharma and auto components. Says Kelly Services' Chibber, "Some companies in these sectors are seeing a rationalization in workforce internally." This means: there is a freeze on hiring and companies are trying to make best with their current manpower."

But could job cuts in US also mean outsourcing of jobs to India? Opinion is divided on this one. Says TeamLease's Sabharwal, "This won't happen immediately. The US is headed for huge demand deflation and they probably do not need so much capacity."

Adds Chibber, "India's cost advantage as an outsourcing destination has eroded as salaries have risen. Countries like the Philippines, Indonesia and Ireland are more attractive in terms of cost." But there's a bright side too. Says E. Balaji, COO, Ma Foi Management Consultants, "While it is difficult to say in which direction the wind will blow, companies with captive centers in India are likely to raise their India headcounts."

 

SATYAM'S DEAL WITH BEAR STEARNS FACES UNCERTAIN FUTURE

S Srinivasan & N Shivapriya, Mumbai
The Economic Times

The impending end of Bear Stearns & Co as an independent company could be a double whammy for Indian outsourcing firm Satyam Computer Services.

The Wall Street giant’s software development and maintenance contract to Satyam, pegged at nearly $10 million a year, faces an uncertain future, but India’s fourth largest software exporter may also be losing a trusted friend who helped it network with global business.

Market sources said Satyam may take only a marginal financial hit if the contract were to go away, as it accounts for less than 0.5 percent the company’s revenues. However, the development shows that Indian outsourcing companies may be more vulnerable to the spreading menace of mortgage crisis than thought initially, they said.

“It was an important client and we have continued to do very well with them despite their problems in the last six months,” a Satyam spokesman said on condition of anonymity. Neither Bear Stearns, nor JPMorgan Chase & Co, which has agreed to buy Bear Stearns, has communicated anything to Satyam so far, he said.

The spokesman said the Bear Stearns crisis showed that the fallout of the mortgage crisis was not limited to the primary players in that market, but had also spread to secondary and tertiary levels. Less than 1 percent of Satyam’s revenues came from the mortgage segment directly, he said.

Stock market analysts said JPMorgan Chase & Co had its own outsourcing strategy in India, including its own unit, and it remains to be seen whether it will retain Satyam for the Bear Stearns part of its business alone. Even if Satyam retains the contract, only the annuity-based maintenance work may continue and “any discretionary spending that can add to the value of the relationship is almost ruled out,” one analyst said.

Satyam is confident the contract will continue for now, at least for the basic minimum parts of the work that its spokesman termed “keeping the lights on”. He said, “We can’t be given the boot, because we expect the baseline work to continue. It is not that Bear Stearns is being closed. It is a going concern... And JP Morgan is not a stranger to us either. I should think that at some point, this might actually be an opportunity,” the spokesman said.

Industry observers say that Satyam might use its Bear Stearns relationship as a door-opener to JPMorgan, especially for technology work related to integration of the two companies and removal of duplication in operations. In addition to the outsourcing contract since November 2003, Satyam has had other relationships with Bear Stearns as well.

The bank was a joint lead manager of its sponsored offering of 13 million American depository shares three years ago. But the company will remember Bear Stearns for its role in one of its acquisitions. It was Bear Stearns that introduced Satyam and UK-based consultancy Citisoft to each other, leading to the acquisition of the latter by the former in 2005 for a total consideration of $38.7 million.

Bear Stearns was a common client of both companies and figured out that Satyam’s technical skills and Citisoft’s investment management expertise could do a lot better together.

 

MID-SIZE IT COS STAY INSULATED FROM SUB-PRIME HEAT FOR NOW

Archana Venkat, Chennai
The Hindu Business Line

While large IT companies have signalled caution in second-guessing customers’ views on IT budgets for the forthcoming quarters and admitted to deals being delayed, small and mid-sized IT/ITES companies are yet to see an impact of the US economic slowdown on their revenues.

Their focus on niche segments and their relatively lesser focus on the US markets have so far diverted any darts of sharp pain that the slowing US economy could have inflicted on them.

Take for example, Mastek Ltd. It derives a majority of its revenues from the UK (For the quarter ended December 2007, Europe contributed about 68 percent of its revenues). R.S. Desikan, Group Chief Financial Officer , Mastek, said “We do not see any slowdown as we are active only in the credit insurance, and not life insurance space.”

Kishor Patil, Chief Executive Officer & Managing Director, KPIT Cummins, noted that out of say ten clients, across industries, there were significant increases in IT budgets for about six of them, while a couple of them may see a softening of budgets. On the automotive sector, he said, “There is no question of cutback on spending as clients have already laid out a 2-3 year road map for new products.”

According to a senior IT analyst, most small- and mid-sized companies have greater exposure in Europe and in the Middle East than they do in the US, vis-À-vis their large counterparts, especially in the finance vertical. “Large companies have typically grown on the strength of their exposure to the US markets, particularly the financial sector. Not so for the small companies that have worked in sectors such as airlines and hospitality that have global presence,” he told Business Line.

Cybernet-SlashSupport, which works in areas that are operations-led such as infrastructure management support and technology support and not capital expenditure-led expenses, sees no roadblock to outsourcing. “In recent quarters, we have not seen a reduction in our clients’ IT investments. Nor has there been any cancellation or postponement of deals we have won,” said Shiva Ramani, Co-Founder and Chief Executive Officer.

Maveric Systems, an independent software testing provider with a majority of revenues from Europe and Middle East, is in fact confident of growing its US business revenues to 17 percent (of total revenues) next fiscal from the current 10 percent, Ranga Reddy, Chief Executive Officer, said.

However, the optimism is not widely shared. Many feel it is only a matter of time before effects of the slowdown catches up with them. According to the Nasscom Chairman, Lakshmi Narayanan, also Vice-Chairman of Cognizant Technology Solutions, “Typically it is the big firms that get affected first. The effects take longer to reach the small firms and this might be the case now,” he told Business Line.

Bharat Varadachari, Partner, Global Tax Advisory Services, Technology, Ernst & Young, felt SMEs were not insulated from recessionary trends. He said, “A large proportion of them are engaged in low value-low margin business. Also, they may not have structured their deals as intelligently as the larger IT .”

Rusi Brij, Vice-Chairman & Chief Executive Officer, Hexaware Technologies Ltd, said IT budgets of clients whose financial year began in April or July were likely to see a more challenging period ahead.

 

IT COS' DEMAND FOR SEZ SPACE RISING, POST-BUDGET

Moumita Bakshi Chatterjee, New Delhi, March 17, 2008
The Hindu Business Line

Real estate developers are seeing a sharp rise in enquiries from IT and BPO companies making a beeline for space in Special Economic Zones (SEZs), barely a fortnight after the Budget ducked the crucial issue of extension of the Software Technology Park of India (STPI) scheme.

“Due to non-extension of STPI benefits, all of a sudden we are seeing a very large demand in all our IT SEZs and we see the rentals also moving upwards. This year, we expect the IT SEZ business to do phenomenally well,” Sanjay Chandra, MD, Unitech Ltd, told Business Line.

According to real estate advisor DTZ, by 2010 as much as 60-70 million sq ft of IT- and ITES-specific commercial office space is expected to come up in India through SEZs alone. Close to 60 percent of the SEZ projects in the pipeline belong to the IT and ITES, as STPI benefits are set to end in March 2009.

On similar lines, Indiabulls said there has been a definite “build-up in demand of late”, although it was early days to quantify the uptake. “Large IT companies will go for their own SEZs, so it is the mid-sized companies that are primarily looking for space,” said Gagan Banga, CEO of Indiabulls, which has two SEZs — one each in Mumbai and Nasik.

Parsvnath Developers also said there has been an increase in enquiries post-Budget. According to Dr B.P. Dhaka, Chief Operating Officer of the Delhi-based real estate company, “many companies are in active dialogue with Parsvnath for space — although we are yet to start the bookings.”

Confirming that there was a surge in demand for SEZ space, with more and more IT clients seeking space in SEZs, Anuj Puri, Chairman and country head of Jones Lang Lasalle Meghraj pointed out that while many new projects would move to SEZs, the high-end work involving researchers and scientists may continue within the city in STPs, as companies will not want to risk losing such professionals.

However, DTZ points out that none of its clients had held back SEZ plans ahead of the Budget. “Several of our clients were evaluating moving to SEZs, irrespective of the Budget announcement,” said Vivek Dahiya, Director of DTZ.

 

IT FIRMS CAUTIOUS ON HIRING AS US RECESSION LOOMS LARGE

P P Thimmaya & Thanuja B M, Bangalore
The Economic Times

Call it the subprime effect or the fears of a recession in the US. Recruitment — a key indicator of Indian information technology industry’s growth — is slowing down. Hiring across companies, especially the small and mid-sized, has entered into a lull with momentum certainly being downcast. It is estimated that overall hiring is down by 40-50 percent compared to last year.

HR recruiters across the spectrum say the hiring pattern during the last three months is certainly not what it was in the last three years.

Given the high dependence of the Indian IT industry on the US economy, companies are increasingly taking a cautious route toward hiring with majority of recruitment now being largely based on work requirement of the firms. Vati Consulting CEO Amitabh Das said the general trend in the market shows that companies are not being very proactive in their hiring plans.

The Indian IT/ITES industry is expected to employ around two million people by the end of FY08 as against 1.6 million in FY07. Significant part of the hiring generally comes from large companies such as TCS, Infosys, Wipro, IBM and Accenture among others. The current slowdown in hiring is expected to hit the small and mid-tier companies hard in their ability to attract quality talent.

Ad Astra Consultants managing director Nirupama V G said: “Small and mid-sized companies are not hiring as many people at junior and mid level as they did earlier. They are, however, hiring at senior levels with quality becoming very stringent.”

At the same time, companies are increasingly utilizing their bench strength to shore up their active resources, unlike in the past. This, in a way, could have bought down the hiring momentum a tad.

Sources said another trend being noticed is that many people on the bench in large companies are opting for mid-sized companies for the same level of salary or even taking a cut in packages, instead of sitting on the bench for six months or more.

The slowdown pattern in the industry has had its impact on the salary levels. TVA Infotech CEO Gautam Sinha said compensation hikes are likely to decrease this year especially for those with generic skill sets, but it may not be the case for those with niche capabilities.

 

RE FALL, HEDGING TO IMPACT IT RESULTS

Shivani Shinde & Ishita Russell, Mumbai/New Delhi
Business Standard

The fourth quarter of financial year ending March 31, 2008, may hold a mixed bag of results for Indian information technology (IT) companies.

On the one hand, IT firms - which hedged themselves taking the view that the Indian rupee would continue rising against the US dollar - will have to bear a negative impact on the portfolio that has been hedged so far.

On the other, their top line as well as operating margins (EBIDTA) will get a boost since the rupee has depreciated by 2.5 percent over the last three months (January 1, 2008 - till date).

In the trailing quarter ending December 31, 2007, the rupee was just about stable while it had risen against the US dollar by nearly 13 percent over the last one year. Every percentage rise or fall in the rupee adds or subtracts 30 to 50 basis points from the bottom line.

“We do feel there will be a slight negative impact on the hedged portfolio but a positive impact on the EBIDTA margins. IT firms like TCS and HCL Technologies, which are hedged at a higher level, will have a larger impact as compared with Satyam and Infosys,” Ashwin Mehta, senior research analyst, Mangal Keshav Securities, said.

TCS, for instance, had about $3.1 billion outstanding in hedges at the end of the third quarter but the forex impact due to the appreciation of the rupee was 1.61 percent (primarily due to the Euro appreciation against the rupee).

Wipro had a hedging cover of $2.11 billion during the same period. Satyam, on its part, has a strategy to cover 50 percent of the expected dollar inflows over the next 12 months. The company has hedged approximately $1 billion.

Avinash Vashishta, CEO, Tholons Advisory, explains: “The big companies have hedged strategically, so with movement of the dollar - even if they witness a 2-4 percent loss by not exercising their hedge - the impact of the dollar appreciation is to the extent of 2.5 percent. The company still benefits by 6 percent. So the gain on the net result is about 3 percent.”

The big IT firms concur. Vadlamani Srinivas, CFO, Satyam Computer Systems, said: “Our hedges include forwards and options. Hence, it’s not possible to give any specific rate. The rupee has been hovering around Rs 40 to Rs 40.60 for the last one month or so. It will not have any negative impact on the hedging portfolio.”

Anil Chanana, executive vice-president (finance), HCL, says: “We have hedged around $2.3 billion already at an average rate of Rs 41, so the strengthening of the dollar against the rupee will not have any negative impact on us. We are safely hedged for the next 10 quarters. Going forward, we expect the rupee to strengthen but we expect such fluctuations.”

Vashishta, however, feels that mid-cap IT firms will be badly affected. “Mid-caps have not got proper advice on hedging. They are ill-equipped to handle such situations so they are bound to lose out. Hedging is a complex derivative. Moreover, I expect the rupee to strengthen further. This is a temporary phase. The dollar might come down to Rs 39.50 soon.”

His view is corroborated by Harit Shah, research analyst, Angel Broking, who says: “Mid-cap IT firms will certainly be impacted as the base is smaller.”

 

NEW GEOGRAPHIES TO HELP IT FIRMS BEAT SLOWDOWN

Rupsa Ray, Mumbai
The Financial Express

A prudent business spread across geographies is expected to make Indian IT companies remain insular to the slowdown in the US. For instance, Mastek has more operations in the UK and believes it will not be much affected by the US slowdown. NetApp, a company into data management, has a wide spread across Europe, Middle East, Latin America and the US, while NIIT Technologies is present in Europe, US and the Asia Pacific. According to analysts, it’s companies dealing mainly in the banking and financial sectors that are going to be affected more, as also companies which are unable to diversify their portfolio and venture into newer geographies. And it’s not only the smaller companies but also the major players who will be faced with the crisis. “The slowdown will have some effect on the domestic industry. But this recession might also be helpful since there might be more outsourcing from the US to India,” commented Ashank Desai, founder, Mastek. “As it is, these days we see the emergence of newer geographies. Thus, Companies with diversified geographies are not going to be affected much. Mastek is not much worried about the slowdown as we are more operational in the UK,” he added.

Industry analysts believe that the slowdown might bring some kind of concern for India because 60 percent of the revenues of the export segment still comes from the US.

“The slowdown will bring some turmoil in the domestic market not only in the first and the second quarter of this fiscal, but there is a concern that it might continue for the rest of the year,” said an industry analyst. “However, companies which are unable to afford hedging or diversify their portfolio are the ones which will be facing problems,” he added.

But many industry insiders see this as an opportunity for the Indian IT industry in more ways than one. “The Indian Economy is robust and the US recession might create a short term problem for the industry, but it’s not going to affect the industry in a big way. Moreover, we should look at the brighter side, it might bring more business to India,” said Arvind Mehrotra, head-Asia Pacific & India, NIIT Technologies.

“The slowdown is a thing of concern but then it opens up opportunities to concentrate on other potential geographies,” said Soumitra Agarwal, marketing director, Network Appliance Systems Pvt Ltd.

“A good thing about this recession is that the Indian biggies will be able to make more acquisitions in the US, and strengthen the business,” commented the analyst.

 

 

INDIAN IT FIRMS BRACE FOR US SLOWDOWN

Rajesh Menon
The Financial Express

As fiscal 2007-08 comes to a close, there is a feeling of uncertainty in the IT sector. The reason: a slowdown in the world’s largest economy, the US—the Indian IT industry’s biggest revenue generator. Tier I offshore firms—Tata Consultancy Services (TCS), Infosys Technologies, Wipro Ltd and Satyam Computers—are all keeping a close watch on where the US economy is heading, with a strange mix of cautious optimism and bullishness. Recently, the country’s largest software exporter TCS came out in the open and said two of its top 10 clients might show subdued demand in the fourth quarter of the current financial year. Similarly, IT bellwether Infosys has projected a muted quarter. On the other hand, Wipro and Satyam have been bullish and have expressed comfort with the near-term demand.

“The near-term impact of the slowdown in the US market is going to be for both big and small players. There is still uncertainty over clients’ budgets and visibility is expected only by the month-end or early April. It is not just the BFSI that is taking a hit, it is even affecting other verticals like retail and manufacturing,” says an official of a Tier-I company. “There have been price increases and also renegotiations have been successful. But volumes may be muted. Also large projects may get delayed,” says a top official of an IT company.

At the end of the third quarter, the top IT companies had all admitted that IT budget decisions by the US corporate houses were getting delayed, especially in the banking, financial services and insurance (BFSI) segment. They had expected a clearer picture by January-end or early February. The worry lines have begun to emerge as the decision-making process has gotten prolonged and their potential clients continue to be on a wait-and-watch mode.

With the BFSI segment contributing nearly 40 percent revenue to the top IT firms, any adverse impact on discretionary spending by the large financial institutions and global banks will be a drag on their fortunes. But what is reassuring is that, in spite of the near-term demand being less visible than earlier, and an increased competition to Indian players from global peers, offshoring as a trend continues to be attractive.

Recently, a top team of global investment bank JP Morgan met 15 IT and BPO firms and interacted with various players in the offshoring industry. It found that secular trends towards offshoring remained resilient. “While the overall IT demand may be tighter than previous years and could create a rough patch for stocks near-term, we share the consensus view that the offshore demand will increase in response to a slower environment and drive-acceleration in the second half,” the report said.

In 2001-03, during the post-tech boom and the dotcom crash, the Indian IT industry had gone into a sluggish phase following lower demand from the US corporates and had to cut rates leading to impact on margins and lower profitability. But, this time around, the players are better prepared for the slowdown. “Most companies have employed more variable compensation, while there is still flexibility in general and administration (expenses), utilisation, headcount and increasing productivity. Helping matters is the more rational pricing versus the last slowdown,” the report said.

There are four main inter-linked factors that have had a direct impact on the Indian IT industry’s competitiveness— the rupee appreciation, the tight labour supply and wage inflation, and macro issues. Compounding these is the vanishing tax holidays for IT firms in March 2009. The rupee appreciation against the greenback—nearly 10 percent in 2007—has adversely affected the margins of the Indian IT players that have taken a hit of 0.4 percent to 0.5 percent and have been unable to pass on the impact to their clients because of the deteriorating macro-economic situation. Although most companies have hedged the rupee against the weakening dollar, in the long-run, unfavourable currency appreciation may put pressure on earnings.

The supply of labour and wage inflation are directly co-related. With demand surpassing supply, wages have been rising 15 percent annually. Apex software companies’ body Nasscom estimates an annual supply of 200,000 engineers, 24,000 MCAs, 30,000 post-graduates and 350,000 graduates. Currently, there are 1.6 million technical professionals employed in the IT industry and Nasscom estimates that the number will grow 25 percent this year to touch two million. But the lack of quality talent is quite alarming. Only 15 percent of the non-engineering graduates and 50 percent of the engineering graduates are employable. This has forced Companies to open their purse strings to get the best of the lot.

As costs have piled up, India’s edge as a low-cost offshore provider has started diminishing, with other countries trying to close the gap. Indian IT companies have to go in for cost-beneficial strategies that would help them maintain profitability. The slowdown would also catalyse the emergence of winners and losers, with companies going in for a hybrid model— onsite or near-shore delivery with offshore presence—likely to emerge the winners.

So, what has made the industry observers and analysts to be optimistic about offshoring in difficult times? It is the adaptability of the Indian IT firms to the hybrid model and also to embrace different service lines and go in for geographic diversification that has a big positive impact on the industry. For instance, Indian firms looking to offer remote infrastructure and management to compete with its global peers and also looking beyond the Indian labour market to eastern Europe, Latin America and China would help them to sustain their revenue graph. Also, with uncertain global macro-economic environment, wage inflation may ease during 2008 as Indian firms reduce hiring and increase utilisation rates, while global IT majors show a reduced sense of urgency in ramping up their India operations.

So, even as there are concerns and fears of a slowing economy and a potential negative impact for Indian firms due to a cut in IT spending, the impact is expected to last for a short-term and may actually result in an increased offshoring in the long-run.

 

BIG BUCKS CAN'T KEEP EXECS BACK

Soubhik Mitra, Mumbai
Hindustan Times (Delhi edition)

In her resignation letter, IT professional, Shaheen Ansari (name changed on request) wrote that she quit because her abusive boss interfered with her work.

An online survey by referral recruitment portal www.yellojobs.com says 42.18 percent Indian employees quit their jobs because of bad bosses. "The company gave me 40 percent increments for five consecutive years. Still, I quit to get rid of her," said Ansari.

The survey polled around 9,000 white-collar professionals working in various spheres from banking to IT. Office politics forced 16 percent respondents to quit.

Vikramjit Singh Sahaye of yellojobs.com says, "Employee retention is gaining focus. Retaining talent makes commercial sense and helps improve project efficiency"

Pandia Ranjan, MD of Ma Foi Management Consultants, one of the biggest human resource service providers in India, concurs: "We expect a slump in attrition. In the BPO sector: which recorded 35 percent attrition the highest across all sectors it will reduce to 25 percent. The overall attrition rate would hover between 10-12 percent."

The study says 35 percent respondents switched to a new workplace, as the earlier job did not offer them growth opportunities and remuneration while 6 percent did not like their work profile. Also, 10 percent of respondents had switched jobs more than four times.

 

US CRISIS: IT COS PRESS THE COST-CONTROL KEY

Mini Joseph Tejaswi, Bangalore
The Times of India

Indian IT's cost-cutting spree is intensifying. Apprehensive of a recession in the US, technology firms have embarked on a conscious budget-shrinking exercise, under which even travel bills are going under the scanner.

We're not just talking about those frequent global jaunts techies go for. The spend on upcountry client visits are also being tightened. Senior executives, including in vice-president and GM levels, are being asked to travel by cabs, that too with one or two other colleagues.

A week ago, Vipin Mohan, vice-president with an MNC here, was asked to make a client visit in Hyderabad. ‘‘We normally fly on such visits. This time, a couple of other colleagues and I were asked to take a cab to Hyderabad. It was cumbersome, exhaustive and time-consuming. But our company made it clear that it was on a cost-cutting drive, so we had no choice.''

A return AC cab with infotainment on board costs Rs 7,500 to Hyderabad, Rs 5,000 to Chennai and Rs 7,500 to Kochi from Bangalore, against the return air fare (for a single person) of Rs 4,500 to 6,500, Rs 3,000 to 4,000 and Rs 3,500 to 4,500 respectively.

‘‘The logic is that at least three employees can get to a client's location and return at a minimal cost. The same cab can be used for local logistics support at the client's place, which again is economical,'' said a logistics in-charge of a tier 1 tech major.

Says Rohan Murthy, product head of a leading software R&D firm: ‘‘I can't understand why companies are getting so paranoid of the recession. My friends and family used to always see me flying on work. Now they are amused to hear about my taxi trips.''

A large number of techies are experiencing this plight-taking taxis instead of ‘taxiing' on airport runways.

Several large tech firms and BPO companies have already started floating e-mails and departmental circulars on cost cutting on travel, say industry sources.

Companies that used to foot return air tickets for their fresh/junior recruits also are shying away, by replacing the trips with III AC and Volvo fares.

Some enterprises have also started using hired buses to ferry their large-volume recruits to cut costs.

 

BLACKBERRY SECURITY ISSUE MAKES E-COMMERCE INSECURE

Surajeet Das Gupta & Leslie D`Monte, New Delhi/Mumbai
Business Standard

Indian operators offering BlackBerry services, top executives of Canadian telco Research in Motion (RIM), the company that owns the brand, security agencies and officials of the Department of Telecommunications (DoT) are expected to meet on March 14 to answer the concerns of security agencies in a bid to prevent having BlackBerry services terminated after the March-end deadline.

BlackBerry has an estimated 400,000 subscribers in India. RIM has been asked to give access to its algorithims (needed to decrypt messages), according to a source.

“The security agencies are saying that we should have access to data that are being encrypted by services like BlackBerry on mobile phones and then decrypted when the phone reaches its nominated destination," the source added. RIM does not, or has not been asked, to do this in any other country but is considering the matter.

The case, meanwhile, has opened a Pandora's box in India. Operators note that if BlackBerry services are banned, security agencies could even target various e-commerce applications – especially money transfers – that use encryption.

Encryption is the process of converting information into a form that is unintelligible to anyone except holders of a specific cryptographic key (the intended recipient). This will make e-commerce virtually impossible.

"The argument can logically be extended to all encrypted transactions on wireless devices including banking, e-commerce, email and chat. It will also have a significant impact on privacy concerns for consumers. Much thought needs to be applied before deciding on it," said Alok Shende, Practice Head, Datamonitor India.

Indeed, scrutiny has already been stepped up for all Internet Service Providers (ISPs).

Rajesh Chharia, President, Internet Service Providers Association of India (ISPAI), noted: "Routine check-ups are fine with us since the issue is one of national security. All ISPs must, and will, cooperate. What is of concern, though, is the fact that we have been asked to reduce the encryption from 128-bit to 40-bit, which is ridiculous.”

The demand, he said, will put the entire online banking and e-commerce sectors in jeopardy. Having represented our concerns, we have yet to receive a response from DoT on this issue."

Cyberlaw experts, too, are concerned over the developments. While the government's motive is good, the Indian Information Technology (IT) Act, 2000 is very unclear on this subject, noted Pavan Duggal, Supreme Court advocate and cyberlaw expert.

"Only Section 69 (Sub-section 2) gives the Controller of Certifying Authority the power to order the interception of electronic communication on computer systems located in India," he points out. In RIM's case, though, decryption is not possible without RIM's consent, which is why the government is fuming.

"This is, perhaps, the first time that the government is admitting to intercepting electronic communication. Blanket power to intercept emails will probably end up diluting the legal validity of encrypted communication in an age when privacy is of utmost importance to corporate and individuals. The Indian government could be firm, asking RIM (or any other player) to take action on a specific case that arouses suspicion. It may not be wise and practical to ban the services altogether," said Na Vijayashankar, cyberlaw expert.

Some technology experts like Vijay Mukhi note that if the email originates from India, it can be intercepted at the wireless service provider's end, since the nodes are in India.

The problem arises if the email originates from a BlackBerry device (since it goes to a server outside India where it gets encrypted). Even then, monitoring every mail that emanates from a server outside India will lead to a ridiculous state of affairs. All email services with servers in foreign lands will have to be shut down.

Google and Yahoo declined to comment on the issue and Microsoft India said the issue was not of immediate concern to them.

Sumeet Gugnani, Director, Mobile Communication Business, Microsoft India, said: “Windows Mobile-enabled handheld devices and cellphones enable users to configure mails on their respective in-house (read in India) exchange servers if they so wish.”

 

HIRING IN IT INDUSTRY SLOWS DOWN

P P Thimmaya & Thanuja B M, Bangalore
The Economic Times (Bangalore edition)

Call it the sub-prime effect or the looming presence of a recession in the US economy. Recruitment — a key indicator of Indian IT industry’s growth — is slowing down. Hiring across companies, especially the small and midsized, has entered into a lull with momentum certainly being downcast. It is estimated that hiring on an overall basis is down by 40-50% compared to last year.

HR recruiters across the spectrum say that the hiring pattern during the last three months is certainly not what it was in the last three years. Given the high dependence of the Indian IT industry on the US economy, companies are increasingly taking a cautious route towards hiring, with majority of the recruitment being largely need-based.

Amitabh Das, CEO, Vati Consulting, said that the general trend in the marketplace is showing that companies are not being very proactive in their hiring plans.

The Indian IT/ITES industry is expected to employ around two million people by the end of FY08 against 1.6 million in FY07. A significant part of the hiring generally comes from the large companies such as TCS, Infosys, Wipro, IBM and Accenture, among others.

The current slowdown in hiring is expected to hit the small and mid-tier companies hard in their ability to attract quality talent. Nirupama VG, MD, Ad Astra Consultants, said, “Small and midsized companies are not hiring as many people at junior and mid-level as they did earlier.

They are, however, hiring at senior levels with quality becoming very stringent.” At the same time, companies are increasingly utilising their bench strength to shore up their active resources, unlike in the past. This, in a way, could have brought down the hiring momentum a bit.

Sources said that another trend being noticed is that many people on the bench in large companies are opting for midsized companies for the same level of salary or even taking a cut in packages, instead of sitting on the bench for six months or more. The slowdown pattern in the industry has had its impact on the salary levels. Gautam Sinha, CEO, TVA Infotech, said that compensation hikes are likely to decrease this year especially for those with generic skillsets, but it may not be the case for those with niche capabilities.

This has also impacted people who make movement across companies. According to Nirupama, the hikes in many cases in junior and midlevels are nil while the maximum is 15% over earlier packages. The normal norm for such compensation hikes is generally in the 20-30% range with 50% in exceptional cases.

 

MICROSOFT TO ADD MORE WOMEN IN HYDERABAD CENTRE

Sreekala G, Hyderabad
The Economic Times

If you find the next version of software products from Microsoft coming with a ‘feminine’ touch, don’t be surprised because the world’s largest software major is planning to add more women to its development centre in Hyderabad.

Microsoft India Development Centre (MSIDC), the second-largest development centre of the company outside its headquarters in the US, has invited applications from girl students, who are doing final-year computer science engineering across the country.

“We have received applications from over 7,800 students, of which we have shortlisted 7,400. We don’t have any target in mind for recruitment because as per our company policy, if quality talentpool is available, numbers will not be a limiting factor,” staffing director Chitra Sood said.

The recruitment process will be completed in over a month. “It is an effort to encourage diversity in our campuses. A diverse workforce will be able to anticipate the needs of our customers and help build products accordingly,” she said.

Currently, MSIDC has 1,400 employees, of which 10 percent are women, while globally, the company has about 17 percent to 20 percent women in its workforce. The new initiative is a pilot project taken up by the company in India. Depending on the success of the project, it will be replicated at the other centres in the country in the future.

This year, the recruitment is limited to engineering students. However, in the coming years, the company plans to include girl students from other streams including those pursuing graduation.

“Though we wanted to increase diversity in our campus, there wouldn’t be any compromise on the quality criteria for selection. We have also found that though due to social conditions women may opt for engineering colleges near their hometown, leading to lesser representation in IITs, their competency levels are on par with men,” she said.

 

SOFTWARE PIRACY RATE CUT CAN SEE $3.1 BN RISE IN REVENUES BY 2011

Bangalore
Mint

India could see economic benefits worth $3.1 billion or Rs. 12,555 crore through expanded revenues and better productivity, add $208 million in taxes, and create 44,000 fresh jobs, if it reduces use of pirated software by 10 percentage points by 2011, a lobby group for software firms has said.

The claim by Business Software Alliance or BSA is based on a study it commissioned and was conducted by research firm International Data Corp. in January.

A previous study by BSA had estimated that India lost $1.25 billion in 2006 to software piracy, up from $367 million in 2003.

In 2007, India, a country of more than 1.1 billion people, spent $16.1 billion on information technology or IT—mainly on computers, peripherals, network equipment, packaged software and IT services. That spending accounted for 1.6percent of gross domestic product, supported more than 34,000 IT firms with more than 766,000 software service workers, and helped generate $1.1 billion in IT-related taxes, as per BSA.

Lowering PC software piracy delivers economic benefits because other sectors derive revenue from working with, installing, servicing, and reselling software. “Most of the benefits from lowering piracy stay within the country. The drop in PC software piracy will have ripple effects on the IT services and distribution sectors, besides impacting the Indian software industry,” said Robert W. Holleyman, president and chief executive officer of BSA.

India’s software piracy rate is more than double the global average of 35percent, standing at 71percent at the end of 2006. Holleyman estimates that the piracy rate would have lowered only marginally for 2007. “Going by the trend seen so far, India’s software piracy rate could be 69-70percent in India by the end of 2007,” he said, adding final estimates for 2007 are awaited.

In an earlier study by BSA, India ahead of competing economies in the Asia-Pacific region Vietnam (88percent), Indonesia (85percent), China (82percent), and Thailand (80percent) based on piracy rates of 2006.

But India has been sluggish in lowering its piracy rate from 74percent in 2004 to 71percent in 2006 when compared with China that reduced its piracy rate 90percent in 2004 to 82percent in 2006. This has been a concern for the BSA officials in India who are targeting a 10 percentage point reduction in piracy.

“Given India has world-class software development skill, if the piracy rates were lower, India could have a much more robust local packaged software market,” said Holleyman, adding that it is key for the government and industry to take it up as a national priority.

A recent Union Budget announcement increasing excise duty on packaged software from 8percent to 12percent is seen as a blow to efforts in reducing PC software piracy, according to industry insiders.

Ravi Venkatesan, chairman of Microsoft India Pvt. Ltd said the increase in the levy would raise software prices. “The hike in the excise duty makes it difficult for software manufacturers to maintain a competitive price-point. The increase in price means that illegal software gets an unfair advantage,” he said.

Microsoft, the top PC software vendor in the world by revenues has already taken up cudgels to fight software piracy, by launching several programmes to create awareness about the ill effects of piracy across the country.

“Access to original software is one of the most critical elements to reducing piracy in India and we have undertaken the initiative to provide original software online and telephonically, which helps ensure easy availability of software to consumers and educate discerning consumers about the value of original software,” said Brian Campbell, director of the so-called Original Software Initiative at Microsoft India.

 

ENERGY MAY SEE HIGHEST HIKE IN AVERAGE SALARY: MAFOI

Mumbai, March 10, 2008
The Economic Times  Deccan Chronicle  The Asian Age  

The energy sector may witness the highest increase in average salary this year, beating the IT segment and others, and attract scores of youngsters, says a leading consultancy agency.

Energy at an expected 16.8 per cent increase in average salary is followed by real estate and construction at 16.1 per cent and IT at 15.7 per cent jump, consultant agency MaFoi said in its employment survey.

Trade and hospitality sectors are going to see a jump of 14.4 per cent and 14.2 per cent, respectively, MaFoi said.

Textile and garments, apparel, paper and publishing, printing, mining and extraction and manufacture of rubber and plastic would witness the lowest average salary hike, it said adding that these sectors would attract a hike of 11-12 per cent only.

About 32.9 per cent of the freshers joined the energy sector, the survey said while IT is expected to hire 26.5 per cent.

However, real estate and construction prefer experienced hands. More than 78.1 per cent in this sector are experienced hands, MaFoi study said.

Hospitality sector also attracts youngsters as about 33 per cent of the workforce would be freshers this year, the study said.

WHY DO CEOS SWITCH JOBS?

Hindustan Times

A handsome salary is always the deciding factor for any person to keep his job and also to change it. At the same time, that something extra is what makes working a pleasure and a CEO is not averse to it. Here are a few reasons that force or lure a CEO into changing his or her workplace.

The challenge counts.

“Perks at the CEO level are more or less comparable and not really a deciding factor for changing the job. But I am yet to meet a CEO who does not move for a greater challenge,” says Rachna Saksena, practice head – ITeS & HR research – Ma Foi Global Search Services Limited. ‘Challenging’, she adds, is how you define the word – the ‘risk element’ is directly proportionate with the returns. In addition to challenge, the company’s brand pull, its balance sheet, future plans and credentials of the executive board also count.

Work satisfaction is another important component for the CEO. He/she could get bored of his/her job profile and yearn for new challenges in about 4-5 years, on an average. When the job ceases to be challenging and interesting, the CEO will look around for something else.

Opting for variety

“One of the reasons why CEOs seeks job change is variety and enrichment in experience,” says James Agrawal, head, BTI Consultants India. There are many successful CEOs who have joined smaller and young /start-up organisations so that could build the company ground up and personally recruit their core leadership group.

There are examples of CEOs who have turned down lucrative global opportunities to work in a challenging and high growth environment in India and others who have joined sunrise sectors such as real estate and retail so that they can apply their past experience to manage new challenges. So variety often goes hand in hand with challenge.

“When you are a CEO of a company, your perks become secondary. It’s what you have contributed to the firm and the growth chart, that becomes more important,” says Datta Shiraz, head, marketing, India region, Cincom.

Perks are important

Though perks are not the only deciding factor for a CEO, they should not be neglected either. Perks are the ‘interest’ that the CEO gets from his job. “Super perks are among the major reasons for many CEOs to rethink about their job,” says Shiraz. A lot of firms do offer what would, at a glance, look outrageous as perks to their CEOs.

These perks may not even be direct payments to the CEO; they could well be benefits offered to his family – paid-for family holidays, club memberships, all medical expenses paid for self, family and dependent parents, two company maintained cars, scholarships for children’s study abroad, even fully furnished accommodation and company-maintained household staff, for example.

 

 

IT FIRMS FACE RETENTION CLAUSE

Mini Joseph Tejaswi, Bangalore
The Times of India

Attrition is not an internal issue any more. It’s, in fact, inflicting insomnia among overseas clients who offshore critical operations to Indian vendors.

Clients are not willing to accept excuses about project delays on account of attrition. Nor are they willing to foot financial losses resulting from delayed delivery.

So clients are now introducing a ‘retention clause’ in contracts. This will make enterprises responsible for retaining people/teams working on the client’s projects. Failing that, they would attract a financial penalty. With this, the rampant practice of internal-poaching - shifting people from a dedicated project to unrelated projects - will also come under the scanner.

"Attrition can be costly. It can break down the entire delivery schedule. Clients today are unwilling to absorb any losses arising out of people exiting at the providers’ end. Hence, they are increasingly dictating terms with providers to include a retention clause in the contract. It’s fast becoming an industry norm," said Avinash Vashishta, MD, Tholons, an offshore advisory.

Pari Natarajan, CEO, Xinnov, an offshore advisory firm, said global customers are increasingly concerned about the productivity of their offshoring partner and have realized that employee turnover is one of the key hindrances to productivity in India.

Clients make significant investments to put teams and processes in place at their providers’ premises. "Under the retention contract, providers are obligated to retain crucial, customer-facing staff including database administrators, project managers, programme managers or team leads," said Sabyasachi Satpathy, senior director, neoIT, a corporate globalization advisory.

Normally, clients and providers agree on a minimum retention of 85% of those on a project for 18 to 24 months. Any break in this could attract a financial penalty amounting to 10% of the monthly invoice. Under this clause, the providers are also obligated to keep their clients posted on any possible exit of anyone in the team and what would be the alternative arrangements.

 

 

PATNI'S SEARCH FOR CEO MAKES NO HEADWAY

N Shivapriya, Mumbai
The Economic Times (Delhi edition)

Patni Computer Systems’ search for a new chief executive officer is proving to be a long-drawn and complex affair. Sources said even after several months of hunt, the company has not zeroed in on a professional.

Apart from the inherent challenges involved in finding a candidate capable of managing a listed firm and delivering on a quarterly basis, the process is taking longer because of concern among potential candidates over the impact of a possible change in ownership, a source said. A dispute between Narendra Patni, the CEO, and his two brothers over their stake in the company to financial investors made headlines last year. Ashok and Gajendra Patni were also keen on bringing in a new CEO to revive the company’s fortunes that has lagged peers in recent years.

“Patni has a very conservative outlook. There are a lot of old warhorses in the company. So anybody who comes in should not only be able to address the sales side but also be make changes on the delivery side. Potential candidates would think twice before taking it on, because the risks are higher. If they are not able to make a success of it, their career graph will be affected adversely even in terms of future assignments,” said an executive with a placement firm.

The possibility of an ownership change at a future date may mean that the new CEO’s tenure could be short-lived, giving him less time to prove himself. “Because of this, there is a feeling that the new CEO will also only be ‘cut and paste’ CEO,” said another executive. A mail sent to Narendra Patni’s office failed to get any response. The other directors on the Patni board also refused to comment.

Narendra Patni’s term as CEO comes to an end in December 2008, and the apprehension is that a stake sale could go through after that. Apart from Ashok and Gajendra Patni who hold about 14 percent each, General Atlantic, which holds about 16 percent in the firm, is also keen on exiting. The new investor coming into the company would be the single largest shareholder and could prefer its own candidate for CEO.

Competition for leadership talent is quite acute among software companies. “As much as the IT sector is facing a slowdown, there is still a shortage in the lateral management. So finding a good quality CEO is difficult when there are others waiting in line to get a good guy,” said an IT analyst, who said Patni’s valuation had suffered as a result. Sources in the placement industry also said the company had earlier gone about the CEO search using more than one firm, before it finally gave the mandate to a one reputed firm on an exclusive basis.

Realising the importance of management continuity, some large software firms have also started grooming younger executives for top positions in recent times. Tata Consultancy Services announced a restructuring exercise that decentralises authority and brings global operations under its COO N Chandrasekaran. Cognizant Technology Solutions has appointed 38-year-old Francisco D’Souza as CEO. “Succession plans have become more important now than ever before because there is market pressure and there is pressure from the organisational side as well. The existing management has completed a full cycle — new blood needs to come in,” said R Suresh, managing director of executive search firm Stanton Chase.

 

AVG SALARIES FOR IT ENGINEERS DOWN 3%: ZINNOV

Mumbai
Business Standard

The average salaries for the engineering positions across product companies in India have come down by 3%. Bangalore continues to be the highest in its pay scale followed by Chennai, Pune and NCR, says the ‘Compensation and Benefit Study 2008 report’ by Zinnov - a management consulting firm.

In order to control costs, the reason for the dip in hiring was attributed to increased hiring at the junior level. "About 40% of the average talent pool among the participating companies are between 0-4 year experience", added Shamim T, Director Human Capital Consulting, Zinnov.

While the dip in average salary could be an indication of salary levels stabilising, organisations are also doing their bit to keep the levels under control. They are offering other cash based incentives such as retention bonus as well variable pay contingent on many factors.

The report noted that the expected average increment in 2008 is about 15%, with few organisations planning to give almost 30% hike to its top performers and rare skill holders.

In terms of states, Pune witnessed salary increase of almost 15-20% in the average salary since last year. This increase could be attributed to the growing demand for talent pool in the city due to a number of companies setting up its operations in Pune. The average increment in 2007 was found to be around 14%.

 

CAMPUS RECRUITMENT TO FALL BY 38 PERCENT

Mumbai
The Hindu Business Line | The Financial Express | The Economic Times | The Telegraph | The Times of India | The Indian Express | Business Standard | The Hindu | 

The campus recruitment by the IT and ITeS companies is likely to fall by about 38 percent this year.

“The problem will be seen in the next six months,” said K. Pandia Rajan, Managing Director of Ma Foi Management Consultants, a player in the human resource space. “We have seen companies staggering the joining dates by 2 to 3 months, batch sizes have come down ,” he said at the release of Ma Foi Employment Survey 2008.

Also, as the demand and supply gap increases with the supply on the rise and a fall in demand, campus hiring could be less than 38 percent, he said.

Elaborating the reason for the trend, Rajan said a depreciating dollar and a possible slowdown in the US economy are the key reasons for measured hiring by the companies.

The sector is also seeing some “downsizing” as “at least two large IT companies have downsized their staff strength,” he said, without naming the companies.

However, he added that with a slowdown in hiring, the attrition rates are also expected to come down by five to six percent.

The Ma Foi 2008 survey expects an addition of about 74,693 jobs, a rise of 7.31 percent over last year in the IT sector while ITeS sector will add 56,221 jobs, a rise of 7.2 percent.

The survey was conducted across 22 key sectors like manufacturing, real estate and construction, hospitality, transport, communications and others.

In terms of percentage of growth in recruitments, the health sector shows the highest growth at 8.9 percent, followed by IT at 7.3 percent, ITeS at 7.2 percent and hospitality at 6.9 percent.

According to the survey, while the hospitality sector would generate the maximum number of employment in 2008 over last year with over 4.26 lakh jobs, education sector will have highest number of jobs in 2008 (1.42 crore).

Demand for fresh recruits is above 30 percent in hospitality followed by sectors such as energy generation and supply sector, ITeS, and mining and extraction.

 

MICROSOFT, INFOSYS 'INCUBATING TALENT' TO BEAT ATTRITION BLUES

Vishwanath Kulkarni, Bangalore
Mint

Faced with the challenge of finding workers with specialist skills and high levels of attrition, technology firms such as Microsoft Corp.’s India unit and local software company Infosys Technologies Ltd have started what they call efforts at “incubating talent” on an experimental basis. Microsoft Global Technical Support Center (GTSC) has allowed about 65 engineering students — studying in their seventh and eighth semesters at local engineering colleges — to carry out projects on weekends at its Bangalore facility for a year, during which they will be mentored and trained before working on projects.

“Attracting suitable talent with a product and engineering mindset is a big challenge,” said Sashi Kumar, general manager, Microsoft GTSC.

The company, which mainly used to hire experienced hands from other technology firms, has started recruiting from campuses in recent years. Still, not assured of sizeable numbers, Microsoft thought about incubating talent as a new way of finding workers with the right skills.

“The incubation programme is a good way to build exposure, depth of thinking and instill engineering bent of mind,” Kumar said.

People participating in the programme are not tied to a Microsoft job and can leave for another job at the end of the incubation programme, he said and added that once formalized, the programme will be replicated at other Microsoft support centres.

India’s second largest software services firm Infosys has also started a pilot project where about 250 final-year engineering students are going through a programme to understand technology.

The engineering students have been chosen from colleges that allow them to go out for final-year projects that run for three-four months, said Srikantan Moorthy, vice-president and head of education and research at Infosys.

Microsoft aims to bring down the training duration for new recruits by as much as half through this programme, said K. Srikanthan, a group manager with the firm. Campus recruits go through 8-10 months of training at Microsoft GTSC. He said the present batch of 65 students was selected from 4,500 candidates from 30 colleges in and around Bangalore.

Started with 40 people in 2003, Microsoft GTSC in Bangalore is now the largest support site for the software giant and employs some 1,200 engineers, who help customers install and run the company’s software in the US, Canada, Western Europe, Australia, New Zealand and more recently in India. The company has some 1,000 contracted workers at vendors, including Wipro Ltd, handling high volume and less complex support services.

Live projects help students understand technology better and at the same time reduce training costs for firms, said Nirupama V.G., managing director, Ad Astra Consultants Pvt. Ltd, a Bangalore-based HR consultancy firm. “For companies such as Microsoft, it’s a good way to evangelize their products,” she added.

K. Raghu contributed to this story