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Pentasoft cuts jobs, wages to beat slowdown

Software services and training firm Pentasoft Technologies Ltd says it is restructuring operations by cutting low-productivity jobs and switching most employees to a variable wage to beat the slowdown.

Pentasoft chief executive D Kannan said at the weekend that over 100 people had already been laid off from the firm's total work force of about 3,500 and said he expected the 'right-sizing' to continue in the current quarter.

"We are restructuring in such a way that each project group and division has to manage its own revenues and costs and at the same time are looking at the productivity of each employee and will be moving most to a fixed plus variable salary structure."

The Madras-based firm's sales grew 18.4 per cent year-on-year to Rs 1.55 billion in the April-June quarter.

Sales however grew less than half-a-per cent from the preceding January-March quarter as the effects of a slowdown in its key US market saw revenues from the US drop five per cent during the quarter to June, to 43 per cent of total sales.

Kannan said Pentasoft was reviewing the size and output of its core middle-level staff including programmers and software analysts and was also looking to cut back on entry level staff.

"Market conditions are forcing us to adapt and we are looking at people who have not yet acquired latest technology skills, probationers and trainees and may move some of these people out to contracts or outsource jobs like implementation support."

He declined to put a specific figure on the cost savings that could accrue from the restructuring.

TRAINING REJIG

Kannan said a sizeable number of layoffs were at the firm's training division where a sudden slump in demand for e-commerce oriented courses, on the back of the dotcom crash in the US, had forced the firm to alter content of its courses.

"We realised we had to shift our focus and have recently tied up with one of the leaders in embedded software, Mentor Graphics, for offering a niche course in this growth area. We are also talking to IBM for some new courses around their platforms."

He said Pentasoft was banking on the new courses as well as some of its existing courses which combine domain knowledge, in fields such as banking, with training in related applications.

"We also expect CAD/CAM (computer aided design and computer aided manufacturing) and GIS (geographical information systems) courses to do well for us," he added.

EASING SOFTWARE FLATTENS SALES

Kannan said sales growth for the six month period to September was expected to be flat from the corresponding period a year ago as average hourly billing rates for its software projects had eased considerably.

"Our average rates for offshore are down to $18 from $22 and for onsite work it has dropped to between $55 to $60 compared to $65 dollars charged earlier. But I think the rates will sustain at this level and things should improve after December."

Pentasoft which is a Tier I supplier of CAD/CAM software to Ford Motor Co currently deploys about 20 people at Ford's US design facilities while another 25 professionals work on the Ford project from its Madras development centre.

Kannan said the firm's current project and software product orders amounted to $50 million, executable by end March 2002.

"We are looking at an office in either Brussels or in Switzerland for the European market and should be opening it in the third quarter. We also expect our equal joint venture in China with Shanghai Industrial to start giving revenues by the end of the third quarter," he added.

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