IT INDUSTRY GOES SLOW ON HIRING, COURTESY US SLOWDOWN

New Delhi, April 21, 2008
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The Indian IT industry, which has been on a hiring spree for the last two years, appears to have been hit by the US slowdown with recruitment firms saying the software companies are trying to cut down on new additions.

Although Indian IT companies are venturing into the European market, the US still accounts over 70 per cent of their revenues. Any slowdown in this market will impact the margin and profitability of the IT companies, which are now looking to cut costs on possible areas like excessive hiring.

"There is a definite decline in the recruitments in the last two-to-three months. This is prominent in the IT services segment and not so much in the Business Process Outsourcing and product development segment," Unit Head of Kelly Services, India's IT recruitment cell at Hyderabad, Phanishree Puramshetty said.

Companies are looking at all possible means to cut costs and reducing the people on bench is just one form of it, she said.

"Earlier, IT companies used to hire anticipating projects, but this is no longer happening. IT companies now hire as and when demand emerges," strategist at research firm KRIS, Arun Kejriwal, said.

"Many IT companies are giving out no or lower bonuses this year. Recruitments are happening in the junior and mid-level management but not in the senior level," Executive Access India's Research Associate Vansh Vardhan Joshi said.

The current slowdown in hiring is likely to continue for another six months, according to Joshi.

While the recruitments have been reduced across all levels, it is the senior level management, which is suffering the most, he said.

With slowdown in the US likely to continue for some more time, the trend of decline in hiring is also expected to continue, says a recruitment firm.

Employees are also realising that it is not conducive to their growth to keep changing jobs and this is in fact leading to more stability in the industry, believes Kejriwal.

 

INDIAN IT-BPO HEADS FOR SLOWDOWN

New Delhi
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The Indian IT-BPO industry is headed for a slowdown in growth this year but is on track to achieve its target of exports worth $60-billion by 2010, industry association Nasscom said on Friday.

“There will be some slowdown but growth will happen. The $60-billion target will be maintained and achieved,” said Nasscom president Som Mittal. Mittal said that the Indian IT-BPO industry needs to grow at 22-23% in future to achieve the $60-billion export target, a rate which could be achieved and exceeded easily.

“There will be 4-6 months of sluggish growth but we don’t think there is any long, deep recession setting in,” said the association’s new chairman Ganesh Natarajan. The Zensar Technologies CEO added that in some cases, slowdown has already led to more outsourcing.

Nasscom vice-chairman and Genpact CEO Pramod Bhasin said there was still lack of clarity over the impact of the slowdown in the US. “The impact will be clearer in the next 3-6 months,” he said.

Nasscom estimates published in its Strategic Review 2008 pegged Indian IT-BPO industry’s revenue growth in fiscal 2007-08 at 33%, exports at over $40-billion and domestic revenue at over $23-billion. The association would release the final figures for FY’08 in June.

With elections in the US, the issue of job losses due to outsourcing has raised its head again. Natarajan said Nasscom is trying to deal with the issue. “We are getting our point of view across by presenting data to prove our case,” he said.

The association laid out its six-point agenda for fiscal 2008-09 on Friday. The agenda includes focus on innovation, building communities for sharing best practices, collaboration, green IT, societal development and education & skill building. Nasscom also announced the appointment of Raju Bhatnagar as vice-president.

He will focus on the BPO sector. The association said it will also put in place initiatives to address infrastructure and security issues.

 

PHARMA PRODUCTION IN ANDHRA LIKELY TO GROW 15 PERCENT

Chennai, Hyderabad, April 15, 2008
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The pharmaceutical sector in Andhra Pradesh is likely to see a better performance during the period April 2008-September 2008, with the industry demand expected to increase by 15-20 percent and production 10-15 percent.

CII's industry monitor survey, which was carried in Andhra Pradesh, Karnataka, Kerala, Puducherry and Tamil Nadu, with an objective of analysing the performance of top five sectors in each of these states during October-March of the financial year 2007-08, captured the views of senior executives of leading companies.

The top five sectors surveyed in Andhra Pradesh, which were identified on the basis of their contribution to the state gross domestic product (SGDP), were agro, manufacturing, pharmaceuticals, IT and textile industry.

According to the survey, the revenue and overseas billing of the IT sector shot up by 10-15 percent and 15-20 percent respectively. Despite the plummeting pricing to 10-15 percent, profit margins were up 5 percent. The employment levels too increased by as much as 40 percent.

The industry predicts a 5 percent growth in the IT industrial demand, with a growth in the order book position of 10-15 percent, resulting in a 5-10 percent increase in revenues. The overseas billing is also projected to increase by 15 percent. Despite an expected decline in price to 5 percent, the IT industry is likely to register a 5 percent growth in profit margins.

 

WIPRO MAY FILL PAUL'S CHAIR

Thimmaya & Mitu Jayashankar, Bangalore, April 15, 2008
The Economic Times

Is Wipro, India’s third-largest IT services company, planning a top-level management rejig? For the past few days, Bangalore’s IT circles have been abuzz with the news that Wipro chairman and MD Azim H Premji has chosen a new vice-chairman, a position that’s been lying vacant ever since Vivek Paul quit the company in 2005. Sources within the company and outside said that Suresh Vaswani, president, global IT service lines, Wipro Technologies and Wipro Infotech, may be among those being considered for this position in the $4-billion soaps-to-software behemoth.
Wipro said it would not comment on market speculation. Unofficially, several in the top rung denied any such move, but speculation in the industry continues. Close associates of Vaswani said the story has been doing the rounds inside the company for two weeks and added: “All kinds of permutations and combinations are being discussed.” According to another stream of speculation, Premji might decide on having two vice-chairmen in order to accommodate senior members in the top management.

After Paul’s exit, Wipro did not appoint another vice-chairman. Instead, the company created a structure where several strategic business units with independent heads reported directly to Premji. This helped the company grow its revenues from $2 billion to $4 billion. Wipro also appointed AL Rao as the chief operating officer in 2005.

Rao, who turns 60 this year, is expected to retire soon. Wipro Technologies, which contributes 74 percent to the company’s revenue, has five business heads — Suresh Vaswani (47), Girish Paranjpe (49, president, finance solutions), Sudip Banerjee (47, president, enterprise solutions), PR Chandrasekar (president, Americas and Europe) and Sudip Nandy (49, CEO, telecom and product engineering solutions). Some of these executives have been with Wipro for at least two decades.

Given the fact that Wipro’s growth has continued apace, a rejig of the top management appears out of place, according to analysts. Unless, of course, the dynamics of the business changes in the face of slowdown in the US economy that is expected to affect the Indian IT growth story. In the past, there has been a lot of discussion on who will succeed the 61-year-old Premji, who owns 79.5 percent of Wipro. Recently, when Rishad Premji, the chairman’s older son was inducted into the company, the media had anointed him as heir apparent.

Wipro had gone to great lengths to clarify that Rishad, who works with Paranjpe, would not take over from Premji any time soon. “Rishad is not Premji’s successor or his successor's successor. You will know this when Wipro announces its succession plan,” a senior Wipro official had said last year. Top executives within Wipro have often stated that the company very clearly wants to distinguish between ownership and professional management. The company will announce its results for the quarter on April 18, 2008.

 

HOUSEHOLD SEGMENT PUSHES PC SALES UP 26% IN Q3

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Led by buoyancy in household consumption and a whopping 158 percent rise in laptop sales, the total personal computer (PC) sales (desktops and notebooks combined) surged 26 percent year-on-year, to touch 1.75 million units in the third quarter ended December, 2007.

“The third quarter was driven by increased consumption in the household segment while industry verticals and corporate sectors such as telecom, banking and financial services, manufacturing, e-governance and IT-enabled services, experienced steady growth. The growth in these verticals is expected to continue in the fourth quarter,” the Quarterly Industry Performance Review released by hardware association MAIT said today.

Apart from the traditional sectors, consumption was also witnessed in small and medium enterprises (SMEs), education, retail and other computer-centric small enterprises. Aggressive pricing by PC vendors has also helped improve the penetration, especially in the households and the SME segments.

With this, the cumulative PC sales for the first three quarters of the fiscal stood at 5.04 million units and are expected touch 7.25 million units at the close of the fiscal.

During October-December, the desktop market grossed 1.25 million units, up four percent over the same period previous year. However, sales were seven percent lower than the sales in the second quarter of the fiscal (sequentially). “Sales are expected to be steady in the quarter January-March as IT sales peak in the last quarter of the financial year,” it said.

As per the MAIT-IMRB study, the assembled desktops – the smaller lesser known regional brands and unbranded systems, accounted for 32 percent of the PC sales in the third quarter, while the proportion of the branded desktops was 68 percent. MNC brands accounted for 51 percent of the market while the Indian brands accounted for the rest 17 percent.

Notebook sales crossed 5 lakh units, recording 158 percent growth over the third quarter in 2006-07. The high growth in notebook consumption can be attributed to the drop in notebook prices and the additional benefit of mobility and space management.

Notebooks are increasingly finding their way into the homes, SMEs and the education sector. Several first-time PC buyers are now opting for notebooks rather than desktop. High consumption in corporates, IT companies, financial institutes and the government, however, continues to drive the notebook consumption, it added.

 

GANESH NATARAJAN IS NEW NASSCOM CHAIRMAN

New Delhi
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Software association Nasscom today announced the appointment of Dr Ganesh Natarajan, Deputy Chairman & Managing Director of Zensar, as its new Chairman for the financial year 2008-09, while Pramod Bhasin, President and CEO of Genpact has been elected as the new Vice-Chairman.

The appointment comes at a critical time when the Indian IT/BPO industry is facing multiple uncertainties including fears of an imminent slowdown in the US, and the looming sunset clause for the STPI scheme. “We will focus on giving every segment a reason to succeed and grow. Whether is it the STPI issue or the US market growth, we will work with all segments. Also, these are not long term issues.

“Our priority is to make sure that all the stakeholders are aware of the challenges. In addition, domestic market will be a focus area,” Dr Natarajan told Business Line.

Asked if the industry anticipated a slowdown, he said, “There may be some slowdown in customer spending, but that will be in the short term. We will have to be cautious about the indiscriminate costs.” Dr Natarajan takes over from Lakshmi Narayanan, Vice-Chairman, board of directors, Cognizant Technology Solutions, who was Nasscom chairman for the year 2007-08.

“It is an honour to be elected as the Vice-Chairman of Nasscom at the time when the IT-BPO industry is entering its next growth phase.

“As a part of the Nasscom leadership team, I will be focusing on leading the Indian BPO and IT industry globally and focusing on key initiatives such as education and security that are crucial for growth of the industry in the years to come,” Bhasin said in a statement. Bhasin has been leading Nasscom BPO Forum.

 

PMO SEEKS TAX SOP FOR IT COS IN INDUSTRIAL PARKS

Deepshikha Sikarwar, New Delhi, April 7, 2008
The Economic Times

IT companies, which have been lamenting the government’s reluctance to extend the popular Software Technology Parks of India (STPI) scheme, have something to cheer about. They can continue to enjoy the tax holiday under the industrial parks scheme. The Prime Minister’s Office (PMO) has asked the Union finance ministry to extend the industrial park scheme — which offers a 10-year tax holiday — to the IT sector.

The finance ministry — which had extended the industrial park scheme till March 2009 — had excluded the IT sector from the facility. North Block had virtually taken over the scheme from the Department of Industrial Policy and Promotion (DIPP).

The PMO’s missive comes after both the IT ministry and DIPP petitioned against the finance ministry’s move to exclude the IT sector from the scheme. This means that units — including IT, if the change happens — set up before March 2009 will enjoy a 10-year tax holiday. Thus, a unit set up in April 2008 will enjoy a tax break till 2018.

The PMO has also asked North Block to reduce the minimum area criterion. The finance ministry had prescribed the minimum area of 50,000 sq mt to encourage large manufacturing hubs, when they extended the scheme. The scheme, in its original form, did not prescribe any minimum area condition. Now, the PMO wants this to be diluted.

A revised notification is expected now and the minimum area could be reduced to 14,000 sq mt to enable IT companies to fit in. The finance ministry had raised the industrial use area to 90% from earlier 66%.

No one industrial unit can occupy more than 25% of the land in a park, bringing it down from 50%. However, these two conditions may be kept untouched in the revised notification, which is expected to come out shortly, a government official told ET.