Search the Internet          Tips  Sites: Finance, Investment

No lay-offs at Infosys

Fakir Chand in Bangalore

Infosys Technologies Ltd, the Bangalore-based global software company, is not unduly perturbed by the meltdown in the US economy. Its chairman N R Narayana Murthy categorically told shareholders on Saturday that there would not be any lay-offs at Infosys during the current fiscal year, slow down in its growth projections and profit warnings notwithstanding.

"On the contrary, we will be recruiting around 1,500 to 2000 techies in the coming quarters as part of our ongoing expansion and consolidation plans. However, owing to the slowdown in tech spending in the US, on an average only 15% of our software professionals are benched from time to time."

"This benching no way reflects under-utilisation of our talented human capital as these techies are always put on orientation programmes and learning process," Murthy replied in a response to a spate of questions from the company's shareholders at the company's 20th annual general meeting.

Clarifying his remark on the need for an exit policy in India during a recent trip to the US on the lines of the one prevailing in free market economies, Murthy said: "One of the advantages of free market principles is that when there is growing opportunity, the employment increases and when there is receding opportunity, the employment decreases."

"It is in this context that the need for a similar exit policy was emphasised. If Indian corporate leaders want to take advantage of growing opportunities, there is need for a similar exit policy as industry can't be saddled with excess workforce during an economic slowdown. A good exit policy will be in order in such a downturn," he elaborated.

At the end of fiscal 2000-01, Infosys had a total strength of 9,831 employees, up from 5,389 at the end of the previous year (1999-2000). It had an attrition rate of only 11.2% for the year under review, one of the lowest in the Indian IT industry.

Unfolding the company's plans for fiscal 2001-2002, Murthy said though the company had projected only a 30% growth and issued profit warnings in conformity with the regulations of the Securities Exchange Commission in the US, where its shares are listed on Nasdaq, the mood among thousands of Infoscions was upbeat.

"Infosys plans to cope with the challenges arising out of the tech slowdown in North America, which continues to be our major market, prudently by deploying the de-risking model as part of our strong risk management processes as they are essential for the survival of the company," he said.

Allaying shareholder fears about the company's bottomline and return on their investment, Murthy said historically, upheavals in any industry have been accompanied by new opportunities for those who are prepared.

"We intend to take advantage of any promising opportunities that may arise. To this end, Infosys plans to have all the ingredients of growth in place -- infrastructure, people, processes, and systems. We anticipate $ 80 million in capital expenditure and intend to add between 1,500 and 2,000 people to our workforce during the current fiscal year," Murthy asserted.

Referring to the meltdown in the US economy and its impact on the Indian IT industry, especially on Infosys, Murthy said these were indeed challenging times for the Indian IT services sector. While short-term considerations continue to evoke pessimism from various quarters, technology will remain a key driver of business practices the world over.

"In this context, I see four trends that will continue to impact the global IT services industry in the years to come:

1. First of all, I firmly believe that the demand for IT services will continue to increase in the coming years despite occasional short-term fluctuations. The recent events do not herald the end of the technology boom; they are just the initial hiccups encountered while a new technology order falls in place.

Given that the pressure on large companies to join the online bandwagon has subsided, technology initiatives will be driven more by the need to establish a competitive edge and also by integration imperatives. The main reason for my belief is that for every organisation, strategy is all about becoming unique in the marketplace and is a requisite for success.

Every corporation needs to build this uniqueness into tits business rules and models, which then become embedded in the information systems of the company. Thus, considerable opportunities will continue to exist in creating customized software. A Gartner-Dataquest study, concluded in January 2001, forecasts that the worldwide IT services market will grow to around $1.3 trillion by 2004.

2. Secondly, I believe that corporations will increasingly resort to sophisticated methodologies in order to measure the worth of an IT project before venturing into it, including valuing quantifiable data instead of being driven by hype.

A key lesson from the dot.com crash is the need to use rigorous methodologies and reliable metrics for project evaluation. The ongoing reduction in technology spending will be uneven, what with a steep drop in investments in areas where payoffs are uncertain.

As we all know, technology initiatives by companies try to achieve one or more of the following: improve customer satisfaction, reduce cost, reduce cycle time, improve productivity, increase customer base, or improve comfort level of customers. In order to help their clients make intelligent decisions, IT service companies need to understand the context of their clients' businesses, refine their project evaluation skills, and advise their clients on which initiatives to invest in.

Thus, project management skills need to expand beyond the estimation of time and budget to include the ability to suggest appropriate choices of technologies and to quantify payoffs to the client in terms of return on investments.

The traditional client-vendor partnership will soon change to include a greater share by the IT services partner in the client's risks and in the benefits arising from these initiatives. Clients will look for increased value-for-money proposition from the vendors of IT projects.

3. The third trend I see is that IT service companies that combine the advantage of global delivery capabilities with the ability to provide end-to-end solutions will emerge as winners. End-to-end solutions providers can increase value by having greater control over the entire software life cycle.

This facilitates greater coordination among the consulting, analysis and design, and the implementation teams, especially in the initial stages of the project, leading to better value for the client.

4. Fourthly, a related trend is the increasing importance of India in the IT world. Traditional IT consulting companies are changing their business model by setting up bases in India. In fact, in the last year, more than 30 overseas companies have set up IT bases in India. As on December 31, 2000, over 185 of the Fortune 500 companies have outsourced their software requirements to Indian software houses.

These companies have leveraged a global delivery capability and thereby derived the benefits of high-quality solutions at competitive costs and with compressed cycle times. As a result of the performance of the Indian software industry, there is now tremendous respect for India in the global technology arena as reflected in a 63% compounded growth in software exports from 1995 to 2000.

Admitting that the new millennium is a turning point in the IT industry, which has been brought about by the sudden reversal of growth in the US economy, Murthy said the high-tech manufacturing capacity in the US increased rapidly during the last four years resulting in a huge pile-up of inventories.

"The dot.com bubble has burst and companies that excessively depended on this segment have been adversely affected. These factors have contributed to a meltdown in the technology sector. The consequent slowdown in the US has affected technology spending by established corporations across industries. Growth rates for many companies in the US have slackened, and consequently, their appetite for new initiatives have diminished," he added.

Money

Business News

Tell us what you think of this report