9th June 2010

IT benches have shrunk
Companies Master The Art Of Just-In-Time Hiring

Bangalore: What's your bench size? That was a question HR managers used to run away from. Not anymore. Ask now and they happily, but confidentially, will tell you that it's negligible or in single digits.
Critical verticals like oil & gas, energy and utility, as also captive units of some like HSBC, JPMorgan, Stanchart and Citi maintain a bench at high single digit rates, but many leading domestic and MNC tech firms have only 5% of their people sitting on benches at present, say external hirers who are privy to these details.
The bench refers to employees who currently do not have any projects on hand. Longer benches mean thinner margins and profitability. Technology companies on an average had a bench size of 15% to 20% while some even had up to 30% of their people sitting on benches, waiting for new projects. The duration of 'benching' was anything between a fortnight to a couple of months. But during the recession, the volume of unbillable bodies became too huge for comfort.
"The bench size is an indicator of a company's ability to manage talent holistically. It is a reflection of its ability to forecast and assess the pipeline properly. Most firms failed in these
fronts and therefore they all incurred huge bench related losses," says K Jayshankar, MD of Pune-based strategic consulting and training firm Empowered Systems.
IT and ITeS firms in India collectively had about 4 to 5 lakh people on benches when recession hit the industry. Once the business hit a negative spiral, organizations had to resort to flab-cutting. "Being unbillable bodies, talent on benches became the easy victim of the environment. This has broken almost all benches in the system," says V G Nirupama, MD, AdAstra.
The recession made companies think smart, says B S Murthy, CEO ofLeadershipCapital. "They are now trying to increase their visibility and access into the virtual talentscape, so that they can hire as soon as the demand arises," he says.
Mohan Menon, MD of Sentient Consulting, agrees. Companies, he says, have mastered the art of finding talent quickly. "That does not mean benches will be fully eliminated, but they will be really thin and short now," he says.
Despite the substantial fall in bench size, many leading IT firms continue to report utilization rates of no more than 80%. Does this mean some 20% of their people are 'benched'?
Not so. The bench has an implication on the utilization rate, "but a zero bench need not mean 100% utilisation", says Amit Bansal, CEO of PurpleLeap, an entry level talent management firm. "One reason for low utilization despite the reduction in bench is that lot of clients reduced the number of workers working on their requirements. This reduced the utilization number but those people did not come to the bench, but continued working on the projects. As markets improved, those people are again on a bill-status," adds Bansal.
25th May 2010

Tech hiring led by product jobs
Space Offers Up To 50,000 Jobs

Bangalore: Product jobs currently dominate the technology hiring market in the country. The product job space was almost shut for over 20 months on account of the recession, but technology product firms are now busy ramping up their people strength to meet delivery deadlines.
A quick check by TOI among third party hirers reveals that product jobs started reappearing in the market before other tech jobs, including IT services jobs, did. And it is a strong comeback, with the volume of hiring up by 50% compared to that in 2008. Webservices, embedded software, semicon, mobiles (handset and value added services), telecom (networking, application), gaming, storage, wireless (technology and devices), healthcare, avionics, automotive are verticals that are seen to require product talent in large numbers.
Companies like Microsoft, IBM, Cisco, Oracle, SAP, Intel, Google, Yahoo, Amazon, Nokia, Philips, Samsung, LG, Huawei, Alcatel-Lucent, Honeywell, GE, Maruti, Mahindra & Mahindra, General Motors, Hyundai, EADS, and the R&D arms of Mercedes Benz, Airbus and Boeing are scouting for product talent in the country for domestic (civil and defence) and overseas markets. India has over 1,000 product firms with Bangalore alone accounting for over 300. Some estimate that 40,000 to 50,000 product jobs are currently available.
Mohan Menon, MD of consulting firm Sentient Consulting, says, "The Indian product story is getting bigger and better, with numerous products for the world being developed out of here."
B S Murthy, CEO of LeadershipCapital, a firm specialised in CXO and product talent hiring, says that during the meltdown, almost all product firms had put their new releases and fresh launches on hold. That was because they could not find markets for new products and they did not have money to advertise and market them. "As a result, 2009 did not see any new products, but this calendar and the next will see large numbers of new products,'' Murthy said.
Ajaay Dutt, director, AIM Plus Staffing Solutions, says rapid hiring is happening in the product niches related to personalized productivity, personalized entertainment and personalized connectivity.
Product jobs come with salaries that are 30% to 35% higher than in the IT service segment. Hiring in this sector is driven by laterals and not freshers.
"New joinees are offered attractive pay packages, bonuses and other perks. Most companies are happy to buy out the notice period of their fresh recruits. Enterprises are in a rush to on-board product talent, and we, hirers, are given no more than a week to 15 days to find and recruit such talent,'' says Nirupama V G, MD of people consulting firm AdAstra.
India has over 1,000 product firms with Bangalore alone accounting for over 300. Some estimate that 40,000 to 50,000 product jobs are currently available.
Product jobs come with salaries that are 30% to 35% higher than in the IT service segment. Hiring in this sector is driven by laterals and not freshers.
Webservices, embedded software, semicon, mobiles, telecom, gaming, storage, wireless (technology and devices), healthcare, avionics, automotive are verticals that are seen to require product talent in large numbers.
27th March 2010

Indian CXOs take on world from home
After Honeywell's Mikkilineni, Alcatel-Lucent Too Elevates Its India Head Vivek Mohan

Bangalore: Just this week, two Indian executives have been elevated to the executive management committees of two of the world's biggest companies. And both will be based in India, not in their global headquarters.
One is Krishna Mikkilineni, about which TOI reported earlier this week. Mikkileneni, the president of the Bangalore-headquartered Honeywell Technology Solutions (HTS), will now report directly to Honeywell's chairman and CEO Dave Cote. He will head the $30-billion, New Jersey-based company's engineering and operations, and he will be based in Bangalore. The other is Vivek Mohan, currently the head of Alcatel-Lucent's business in India, who will now be president of Alcatel-Lucent's global services business, according to an announcement by the company on Thursday. The services group accounts for 24% of the company's global revenues of Euro 15.2 billion, and Mohan will handle this out of Mumbai.
Ben Verwaayen, CEO of Alcatel-Lucent, has been quoted in a release as saying: "Vivek is the perfect executive to accelerate this (the services) business' growth -- bringing hands on experience in overseeing a world class team that has performed managed services and network maintenance for some of India's leading service providers." Mohan has been with the company for ten years now, for the last two years as MD for India with 7,000 employees.
A growing number of Indians has become part of executive management teams of global companies in recent years, but to have them based out of India itself is an altogether new trend, reflecting the enormous importance the country has acquired in the post-recession world. And especially in the world of technology, there is recognition that Indians are among the best placed to run some of the businesses, and these would be done best out of India itself since it better reflects the requirements of fast growing emerging markets in general.
Priya Chetty-Rajagopal, VP in executive search firm Stanton Chase, says global managements are realizing that America is not the centre of the world anymore. "The balance of the world economy is shifting to India and China, and they realize that if they don't take such actions, the Bhartis will take over the world," she says.
Romi Malhotra, CEO of Linkage India, a global leadership development organisation, agrees: "Global enterprises are conscious about positioning their leadership in high-growth markets and closer to customers. India is poised to become the top 10 or 5 economies in the world. So, corporates want to understand the growing needs of this economy that is under severe transition, its changing cultures, nuances, customer dimensions, pricing, and eco-system."
Mohan Menon, CEO of Sentient, says the trend of moving global leadership responsibilities was becoming evident in the technology space, "but it is a matter of time before it moves to segments like automotive, telecom and banking". Global leaders of many American and European mining, automotive, FMCG, chemical, power, and telecom companies are already sitting in China.
"Global enterprises have started thinking beyond Singpore, HK and Tokyo. Today, Bangalore/New Delhi is a great global address for global decision makers of many MNCs. IBM, Cisco, Accenture etc have their biggest infrastructure investment in India, outside of the US. And it is only natural that they would all want to have their best and accomplished executives looking after these investments,'' Menon said.
Cisco was one of the first to recognize the requirement and had moved Wim Elfrink, an executive management member, to Bangalore in 2006 to head what it called the Globalization Centre East. But now, as Malhotra notes, it is no longer a matter of shifting leaders here, but global responsibilities being shifted to leaders in India.
"Indian CXOs have demonstrated their capability to manage complexity, size and widely diverse markets. The status of an India country manager has gone up by several notches in the last five years. So it is natural that global organizations would want to leverage their expertise and strength,'' he says.
Rajagopal echoes that: "Global corporations recognize they don't need a John Brown in India. A Krishna Mikkilineni is as good, especially since he has come through the system and knows the company culture very well."
Southscope – March 2010

Movie promotions,South style

Times of India – 18th March 2010

Infy in ferment over HR policy
Many Employees Have Been Demoted Following New Norms

Bangalore: For over a decade, Infosys Technologies has been seen by many as the epitome of employee friendliness. That reputation has now taken a big knock. Several measures taken over the past few months — partly an attempt to correct what the company saw as excesses of previous years — has had many employees seething with anger. That's reflected in hundreds of comments made in response to articles about Infosys on the internet in recent weeks, and in conversations TOI had with employees. Even the official internal blog is said to have been used to convey the discontent.
The biggest grouse relates to an HR initiative called iRace — Infosys Role and Career Enhancement — that was rolled out last year. The initiative was designed by consulting firm Mercer with the idea of mapping positions with experience and skill levels. Previously, positions and promotions were often given arbitrarily, based on an employee's bargaining strength, which often was substantial considering jobs were aplenty. Many were given managerial responsibilities within three to four years, often leading to clients complaining about their lack of technology skills.
While iRace's objective appeared laudable, it suffered in its implementation, the worst of which was to reassess all employees based on the new standards. Many employees were demoted on the ground that they did not meet iRace's experience norms. So, senior project managers went down to project managers, project managers to technical leads, some even went down two levels.
"Designations are so important for everybody. And if the management found somebody good enough for a certain position earlier, how can they now say that he is not? What makes it worse is that, all those affected were at lower levels. Nobody in the senior delivery manager and higher positions were affected," said an employee who did not want to be named. Nandita Gurjar, global head for HR in Infosys, said about 5% of the company's employees would have been impacted by designation corrections and demotions. Infy has a little more than 1 lakh employees, so that would mean about 5,000 being impacted. She also added that salaries had been protected and that 95% of the company's employees had taken the iRace "career architecture" well. But some employees insist that's not the case. "Not a single colleague of mine is happy with iRace. It has only made it tougher for employees to move up in their career; it has brought a lot of uncertainty about career growth,'' an employee said.
Some also believe that certain aspects of iRace are irrational. It looks at not just an employee's overall industry experience, but also her tenure in the particular vertical she currently is in. "It discounts your earlier experiences in multiple other verticals. But I thought in today's world, multiple vertical experience is actually an advantage," an employee said. The HR initiatives seem to have the full backing of the Infy management. About three weeks ago, Infosys chief mentor N R Narayana Murthy had a meeting with executives in the rank of delivery manager and above to try and come to some understanding on the matter. "But we didn't get any assurance we were hoping for," a senior executive said.

COST CUTTING MOVE?

Some analysts believe iRace is at least partly an attempt by Infosys to cut costs. Mohan Menon, CEO of Sentient Consulting, a business performance enhancement firm, said when the going was good, companies resorted to "mad hiring, giving employees huge monies and fancy designations. Today, when things are still bad, they are looking at innovative ways to bring down cost. Most of these exercises defy logic and it can be traumatic for employees."
B S Murthy, CEO of Leadership Capital, pointed out that many tech firms were doing some form of re-banding, with the primary objective of doing away with people and reducing the budget. "Some 12-15% of employees in the 6 to 15 years' experience category are going to be potential targets of this. Companies will easily save salaries in the 15-25% range," he said.
If this is indeed an objective, there are signs of success. Brokerage firm CLSA recently put out a note to its clients saying Infosys may have lost nearly 4,000 people in February alone, up from the average of 1,200 a month. Infosys has said CLSA's figure is grossly exaggerated, but the talk within the company is certainly about large-scale exits. "We are finding it tough to fulfill our delivery commitments because of the rise in attrition levels. In fact, many employees are now openly expressing their discontent because they know there are jobs available outside," said a senior executive.

What's iRace?

Infosys calls iRace a career architecture that aligns talent management activities with client priorities, business focus and employee aspirations. It is said to be a platform that clearly defines roles, competencies and proficiency requirements while linking career movement to performance and business focus. Says Nandita Gurjar, global head (HR), Infosys Technologies, "iRace offers 26 career streams. It is about how people move in the organization in various levels. The objective is to focus on people with deep domain knowledge who can add high value in our business. The career architecture was introduced six months ago and 95% of our employees have taken it well, while 5% of our workforce will be impacted by designation corrections and demotions. However, we have protected everyone's salaries.''
Times of India – 24th December 2009

People outlook positive for year 2010: headhunters

Bangalore: After a long hibernation of 18 months, headhunters are actively out in the market as talent requirements have started trickling in. The hiring momentum is expected to pick up from April onwards.
Even in a worst scenario, calendar 2010 will create around 50,000 fresh IT/ITeS jobs against zero fresh jobs — except a very thin campus hiring — in the previous year. The calendar 2007 had witnessed a bumper hiring at over 3 lakh while the growth got tapered off towards the third quarter of 2008 clocking a total hiring of only 1.8 lakh.
B S Murthy, CEO, Leadership Capital, says the new year will usher in recovery and a wave of general optimism across segments. "This means a complete change from the current skeletal and need-based hiring. The large volume hiring realm (services space) will warm up by the second quarter of calender 2010. A 15% increment in hiring volumes is expected in the first two quarters while the growth could cross 20% or double towards third and fourth quarter.''
According to Nirupama VG, MD, AdAstra, requirements will start pouring in like tsunami, HR departments of many corporates have already geared up for large scale hiring after a long standstill. "Normalcy will return to the industry by April. In addition to domestic hiring, India is going to emerge as a huge sourcing ground for global jobs across segments, positions and profiles.''
"When we enjoy a vantage position in human resources, talent is still a scare commodity in global markets. The year 2010 is going to be bright year for India in terms of domestic and global placements,'' adds Mohan Menon, CEO, Sentient Consulting.
Times of India – 31st January 2009

Meltdown eats into health insurance pie

Bangalore: The economic slowdown is pushing corporates to rethink on the medical benefits they offer to employees. Many are considering making employee health insurance schemes thin and basic.
   "A couple of organizations have postponed their annual health checks by two quarters. Some have reduced the frequency from annual to once in two years," says Vipin Prasad, COO of PeopleHealth Services, a health management firm. "A few companies that were planning health benefits have postponed it," he says.
   Companies are also negotiating with insurance providers and third party insurance outfits to explore ways and means to cut cost. "Some companies are targeting a 20%-25% saving from this exercise," says Mohanlal Menon, MD of strategy advisory firm Sentient Consulting.
   Many IT and ITeS companies have cut down on benefits like health checks, wellness programmes that focus on awareness creation, counselling support. "Companies have done away with frills and riders in their group policies. They don't want the premium to rise during this time," says Milind Joshi, senior VP of Bharti Axa General Insurance.
   Companies that gave employees option to insure even parents are telling them to pay for that part of the premium; the organization will pay only for the immediate family. The health insurance industry is expected to grow at a compounded annual rate of 25%-30% to reach a market size of about Rs 28,000 crore by 2015.
   Insurance companies say individuals feel that the medical cover given by corporates is not sufficient to take care of their family needs and that has contributed to the increase in the number of individual health insurance.

What are the options?
l Limiting insurance cover to a lesser amount
l Restricting beneficiaries to 2/3 from 4/5
l Bringing insurance under a co-pay model where premium is equally shared by employers and employees
IT firms not to trim medicare

Bangalore: Will meltdown spell a grim prognosis for IT employee medicare? Not as of now. For IT companies, medical benefits are a major employee attraction. They spend huge sums on employee medical care. Infosys Technologies spends Rs 20 crore a year for 85,000 employees in India, and another Rs 100 crore for 15,000 of its staff overseas. "Our US employees are on a co-pay model. They pay 50% of the annual premium of Rs 200 crore. Co-pay is an ideal option where the cost is shared between both the parties. But as of now we are not thinking of any change in the medicare facility for employees," says Mohandas Pai, director (HR) in Infosys Technologies.
   Typically, Indian companies provide a cover of Rs 2-3 lakh per employee and MNCs about Rs 5 lakh with an option for the employee to increase the cover by paying for the additional cover. Early last year, Accenture India moved to a scheme under which employees would have to bear about 30% of any medical expenses. But this does not appear to be linked to the global downturn.
   Some say the retail market (individual health insurance) will now grow faster as corporate and group health insurance policies are dropping. The health insurance industry witnessed a growth of 52% in the first quarter of 2008-09 compared with 2007-08, says a report on the health insurance business by KPMG and CII.
Times of India – 15th October 2008

Infotech attrition rate slides to single digit

Bangalore: Remember the stories about technology professionals walking around with multiple job offers, bargaining with employers for club memberships and fancy cars, joining one company and then slipping out in a few months, often days, to join another at twice the salary? All that's history.
   Employee attrition rates are today plunging. In Infosys Technologies, the attrition rate in the July-September quarter was just 8%, against about 13% in the corresponding quarter the previous year. Many in the IT industry had seen attrition rates as high as 20%, and in BPOs, nearly 60%. But analysts now say that rate in IT has dropped to single digit, and in BPOs to about 20%.    Team Lease MD Manish Sabhrawal says the current market scenario has blunted salaries and has also ushered in sanity by bringing attrition levels to an all-time low. "Looks like a phase of hormonal imbalance is over,'' he says.
   Recruitment in the banking and financial services vertical is almost dead, given the collapse of many financial institutions. Nearly 50% of the business of many Tier I tech firms comes from this space. Employees in this vertical today have no option but to cling on to their jobs.
   Even professionals in other verticals are seen to be wary of shifting to another company even if that job comes with a better offer. Some recruiters say it may not be advisable to move to a new job at this point.
   "Employers are always looking at ways of cutting cost. Talent accounts for over 60% of the total operational cost. So, no one wants to become the 'last in first out'. It's easy to fire new recruits and people on probation,'' says Amitabh Das, CEO of Vati Consulting, a recruitment process outsourcing firm.
   Mohanlal Menon, MD of Sentient Consulting, also notes that employees have become extremely cautious about making any move to get out of existing jobs. On the other hand, companies are introducing additional processes and systems to make hiring more stringent and need-based. "A wonderful combination of this employee-employer teamwork has changed the industry and made it more stable and real,'' says Menon.
Times of India – 17th September 2008

HP job cut will impact India ops
IT Giant To Slash 25,000 Staff Globally; Financial Crisis Not To Blame

Bangalore: Hewlett-Packard's decision to eliminate nearly 25,000 of its 320,000 jobs worldwide is expected to have a significant impact on its Indian operations too.
   Analysts in India believe that in the short term, the company could see off some 1,000 people, and that in a three-year period this could go up to 6,000 of its nearly 60,000 people in the country.
   The computer and printer maker's job cuts come as part of its plan to integrate Electronic Data Systems (EDS), the computer services giant that HP acquired for $13.9 billion in August as part of an effort to match IBM in the services space. Following the acquisition, a workforce reduction was seen as inevitable, but the figure HP has announced is way beyond anybody's expectations.
   Kapil Dev Singh, managing director of research firm IDC India, said HP's announcement mostly stems from the global economic scenario. "It's an instant fall out of what's happening on Wall Street. The IT accounts of banking and financial institutions (BFSI) have been shrinking. So hiring for this space has been put on a slow burner by global companies," he said.
   Mohan Lal Menon, MD of strategy advisory firm Sentient, said a lot of overlapping was expected with the integration of HP and EDS-MphasiS (in India, EDS had previously acquired MphasiS). "Most of it would have been in the areas of HR, administration, sales and marketing. But the trigger for HP is definitely the precarious conditions in the BFSI space across the US, Europe and Asia. HP seems to be ahead of the curve, towards planning for the economic downturn,'' he said.
   Till the time of going to print, HP had not responded to questions sent by TOI on the impact HP's workforce reduction move would have on India. However, a senior official at MphasiS said no immediate impact was expected on MphasiS. "We have been hiring junior to top talent. We have been expanding our footprint across the country. So its business as usual,'' he said.
   However, an HP employee said the organization is buzzing with talk about consolidation of work currently happening in different countries. "In some cases, this is expected to bring more work into the Bangalore competency centre. Since the work will be handled out of one centre and will be more structured, the need for people working on a project is also reduced," he said.
   HP said those laid off will be offered severance packages, counselling and job placement services. The company expects the global restructuring to result in annual cost reductions of nearly $1.8 billion. The layoffs will be over a three-year period, with half of it happening in the US. But the company said up to half of the positions may be refilled (in other departments) over the course of that restructuring.
Times of India – 4th July 2008

IT cos in austerity mode
Benchers go to output, hiring shrinks 40%

Bangalore: The 'boom' element in hiring seems to be substantially diminishing. Thanks to the economic turbulence in the domestic and international markets. Tech hiring has shrunk upto 40%.
   "Subprime crisis, unprecedented rise in oil and commodity prices and the Indian economy reeling under a double-digit inflationary regime, it's no surprise that the people-boom is taking a beating,'' said Mohan Menon, CEO, Sentient Consulting, a corporate advisory firm.
   The country has over a million tech workers of which IT services alone accounts for almost 7 lakh, on an average, 15%, that means 1,05,000 people are on the benches.
   "Ideally, no c o m p a ny wants to have people on benches. So, there is a huge amount of focus on moving the bench out into productivity. That's where a lot of tech firms are going to save on additional hiring. And this will definitely eat into the quantum of hiring,''said Amitabh Das, MD Vaticonsulting, a recruitment process outsourcing firm. In the coming quarters, many tech firms are likely to revise their people outlook downwards. Its already happening unofficially. "Hiring is almost nill among BFSI firms, IT consulting too has impacted greatly. The industry in general is reworking on hiring outlook. The line up of additional inputs (talent) is pretty thin for many,'' observed B S Murthy, CEO, Human Capital.
   According to Manish Sabrawal, founding partner, Teamlease, "There is something weird going on in this downturn. There has been a clear blunting in salary growth but unlike most slowdowns where lower attrition is almost a leading indicator, this time attrition continues to chug away.''
   Well, may be that's the only silverlining in the cloud.
Times of India – 4th June 2008

IT salary hikes hit single digits
Market Downturn, Labour Cost And Billing Pressures Take Toll

Bangalore: What we predicted earlier this year is now coming true. Salary increments in IT companies are lower this year than it has been in previous years. In some cases, significantly so.
   EDS is giving an average increment of only 8% to 10% this year, substantially lower than the 18-20% it gave last year. "In some cases last year, it even went up to 40-50%," said an employee of the company.
   That's the increment trend across the tech sector. "We have received lower increments this year," said an employee of Infosys Technologies. "Laterals got only some 8% hike. A company security policy e-mail has also asked us not to share such details with anyone outside.''
   Mohandas Pai, head of education & training in Infosys, said that inclusive of variable pay, the company's increments this year were in the range of 11% to 13%, against 13% to 15% last year.
   Senior HR executives at some large tech firms confided that their companies are not in a position to increase salaries "beyond single digits'' at least for a couple of years, till the global markets stabilize.
"Companies are hit from all corners. Market downturn, increase in hiring cost and billing pressures are choking even large players. This has forced them to drastically revise their increment formula,'' says Mohan Lal Menon, managing director, Sentient Consulting, a corporate consulting firm.
The biggest pressure is seen to be coming from the US, which looks to be quickly slipping into a recession. Almost 60% of the revenues of many Indian IT companies comes from the US.
Tech firms are increasingly moving away from an equalitarian regime in c o m p e n s at i o n . " C o m p a n i e s preferred it as they wanted to keep employees across the board (except the bottom 10%) happy, to keep attrition at bay. But in today's scenario, cost pressures are compelling them to change that approach,'' said the HR director of a tier 1 tech firm.
   "Indian companies have so far been effecting unsustainable salary increments. It has clearly hit a correction mode this year,'' says B S Murthy, CEO of hiring firm Human Capital.
   Wipro's average salary increments are expected to be in the range of 8% to 10% against 12% to 14% last year. "Pay hikes expected to happen in August will be some percentage lower than the previous year's,'' says Anindya Shee, head of compensation & benefits in Wipro.
   Product firms that normally give out huge hikes are also on a cost-cutting binge. "Recession is hitting them hard and increments are down to 10% to 15% from 20% to 25% in previous years,'' observes Ajay Dutt, VP, New Era India Consulting.
   And if lower increments make employees unhappy, there's little they can do about it.
   In previous years, they would have jumped into another job at a signficantly higher salary.
   Now, with IT companies no longer hiring as they were, nor offering any such hikes, they have to be content with what they get.    (With additional reporting by Anshul Dhamija)
Times of India – 2nd June 2008

Addressing nextgen challenges through product innovation
(The author is managing director, Sentient, strategy advisory firm & CEO coach for fast growing SMEs in Asia)
Mohan Lal Menon

   India, being one of the fastest growing economies in the world, is rapidly making a transition from a service provider to a product innovator. The signs of change are already evident in the landscape.
   Several enterprises are busy designing practices to create organisational culture that enables effective knowledge sharing and adoption of advanced technologies. They have started diverting their energies to create value and not just cheaper cost options. They are also entering into alliances and collaborations with other research firms and most importantly investing in initiatives to challenge standard methods and norms, thereby setting a tone for product innovation in the country.
   Large corp o r at i o n s that made this transition some years ago, have already started earning profits, which in turn has a positive impact on the revenues of their external stakeholders as well.
   Joining the product innovation bandwagon now are hundreds of small and medium enterprises (SMEs) in the country. These firms, that are keen to adopt innovative business practices and approaches, are expected to play a critical role in the product space. SMEs account for a major chunk of the Indian market — around 80% of corporates in the country are under the SME category — and their growth and development is extremely crucial for the growth of the industry in particular and economy in general.
   But again, SMEs cannot grow on their own and what they need is a collaborative effort involving individuals, companies, academia and the government. Governments should be actively involved in removing all obstacles on the way to innovation, improving infrastructure, creating R&D facilities, introducing pro-active policies to increase the pace of product innovation.
   But, innovation in India is often focused on improving processes, rather than creating new products. This largely due to the kind of infrastructure that exists in the country, which is not conducive for product innovation. Infrastructure in terms of access to advanced technologies, R&D laboratories, and proper logistics is what India lacks to facilitate or foster any type of product innovation.
   India's situation today is somewhat similar to that of China few years ago and what made difference to China was its massive investment in infrastructure which later started yielding rich dividends, directly impacting the overall economic growth of the country.
   There are some key measures that need to be taken to promote product innovation. According to Paul Devadoss, an Information Systems Professor at Lancaster University, there are two things India needs to invest in. A good infrastructure to support research careers in the academia in the country is necessary. Further, leveraging opportunities for international research through institutional tieups can help further world class research here. Lancaster University's tie-up with IIT, Karaghpur, in management science research is an example that will mutually benefit both institutions in producing world class    research.
   In addition, big corp o r at i o n s should start i nve s t i n g more in R&D facilities that are targeted towards innovations in products and technologies. Another important step that needs to be taken by them is to provide good opportunities and encouragement to research graduates. Science graduates are increasingly willing to stay away from research activities as there is not much of recognition or remuneration for PhDs today in the country.
   Providing opportunities and appropriately rewarding them will encourage lot of young talent to pursue higher education, particularly in research. This in turn will lead to the development of a large human resource pool with billable research capabilities, a critical factor that is currently lacking in the country. After all, availability of a quality, cost-effective knowledge base is essential for any country to make effective forays into product innovation. Therefore, only a holistic approach by the stakeholder community can make a real difference on the ground.
Times of India – 15th May 2008

More pinkslips from IT cos
Forced Attrition Prompted By Recession In US Markets, Rupee Rise

Bangalore: Several technology professionals and BPO executives are likely to be pink-slipped this year.    Companies normally ask around 10% of their bottom-level performers to quit after appraisals every year. But this year, the rupee appreciation and the widely expected US recession are likely to push this number up to 20-25 per cent.
   Several service providers are being told by their clients overseas to cut employee cost, which has increased by 15 to 20 per cent in the last 18 months. Enterprises are also being pushed to cut drastically or eliminate their bench-sitters.
   In other words, the industry is clearly heading towards a forced-attrition regime. "You can't actually term it downsizing. It will be an overall rationalization exercise, wherein we will also get rid of benches. Every corporate action is dictated by market dynamics,'' said president (HR) of a leading IT firm.
   Global banks have been writingoff billions of dollars due to the subprime crisis. Other clients have started cutting or cancelling contracts. Consequently, domestic IT providers are already tightening their belts. Expenditure towards travel, employee entertainment including outing and dinners, birthday/wedding anniversary, gifts/vouchers, reward programmes, free holidays and phone calls have already come under the scanner.
   "The message is to cut everything that's directly unlinked to revenue. The heat of the recession is already being felt among Indian providers. As a result, they are looking at all kinds of cost-cutting measures, including people-pruning,'' said Mohan Lal Menon, MD of executive search firm Sentient Consulting.
"After having maintained huge benches for several years, enterprises today are targeting a zerobench scenario. That means more people will be shown the door this year," says Nirupama V G, MD of staffing company AdAstra.
Over the last three years, most companies were aggressively building their bench strength in the belief that these employees could be used on newer projects. But with orders drying up, the benches have become liabilities.
Kris Lakshmikanth, MD, Head Hunters, says, "Forced turn-outs are expected across the industry in thousands, especially in companies with large people bases like TCS, Wipro and Infosys.''
According to Zubin Shroff, MD, Talent Management Group, "Performance is going to be the ruthless yardstick. Enterprises have realized that a productivity-bound peoplecorrection is key to survival.''

Not in PINK of HEALTH

Overseas clients are asking service providers to cut on employee-cost
Companies cutting cost on travel, employee entertainment, reward programmes, free holidays, phone calls, etc
Enterprises moving towards zerobench scenario as benches have become liabilities

US is in recession, confirm economists

New York: Economists are increasingly certain that the US has slid into recession, according to a latest survey by the Wall Street Journal.
   Following months of speculation about the dreaded 'r' word, the new survey shows a "precipitous shift" toward pessimism from the previous one conducted five weeks earlier and is reinforced by new data showing a sharp drop in retail sales last month, the paper says.
   Thirty-six of 51 respondents, or more than 70%, said in a survey conducted March 7-11 that the economy is in recession. The commerce department had said earlier this week that retail sales fell 0.6% in February; sales excluding the volatile auto and auto-parts categories fell 0.2%.
   The declines, the journal says, reflect a sharp slowdown in consumer spending, which accounts for more than 70% of US economic activity, as Americans grapple with high gasoline and food costs and declines in home values and other asset prices. The economists, it said, now expect non-farm payrolls to grow by an average of just 9,000 jobs a month for the next 12 months — down from a previously expected 48,500. Twenty economists expect payrolls to shrink outright. On average, the economists predicted the unemployment rate will be 5.5% in December, up from the current 4.8%. The economists, on average, forecast meagre economic growth — just 0.1% at an annual rate in the current quarter, and 0.4% in the second, the survey shows. Although the classic definition of recession is two consecutive quarters of declines in the gross domestic product, Stephen Stanley of RBS Greenwich Capital was quoted as saying that the National Bureau of Economic Research, the nonpartisan organisation that is the official arbiter of recessions, doesn't always strictly follow that definition. AGENCIES
Times of India – 14th May 2008

Will it change the IT landscape?

Bangalore: Will the marriage between Hewlett-Packard and EDS change the existing IT landscape in India? By becoming a third or even second player in some areas, the HP-EDS entity may refine the competitive scenario in the country's tech market place.
   Emergence of a formidable third player will mean additional pressure on MNCs and tier I domestic players like TCS, Infosys and Wipro. Even after the acquisition of Compaq, HP was still perceived as a hardware player.
   "Now the EDS connection will give HP more spectrum and depth and launch it in the mainstay IT with additional capabilities in IT infrastructure, IT application, back-office services and consulting. That clearly means additional pressure on other players including multi-national players,'' said Avinash Vashistha, managing director, Tholons, an offshore investment advisory.
   Going forward, the battle will be tough for domestic players considering the fact that IBM, Accenture, EDS and CapGemini are already putting pressure on them.
   Mohanlal Menon, an independent analyst said the MNC and domestic trio — IBM, Accenture and HP-EDS and TCS, Infosys and Wipro — will now be significant forces in influencing the course of IT industry in the country.
   "EDS will gain access to HP's mature offshore model while HP will inherit EDS' strong financial services practices. Mid tier players like Satyam, Cognizant, HCL and Patni will also be highly under stress from multiple corners in terms of cost, talent retention and talent acquisition.''
   According to Sabyasachi Satpathy, direcror, NeoIT, it may not immediately impact the revenues or margins of any individual player in the industry. "However, it will bring in additional stress on them to get their act together in terms of designing, realigning and augmenting strategies. There will also be stress on in-organic deals, partnering and consolidation.''
   Narayanan Ramaswamy, executive director, KPMG said, "IT is truly getting into a state of maturity. The size of these two companies is making it even more interesting. Finally, will this tech-merger mean bad news for big blue? Not really, the market will see another big league player and it will be a healthy competition.''
Times of India – 15th April 2008

Investors' eyes on IT guidance
Infosys, HCL Financial Results For Q4 Announcement Today

Bangalore/Mumbai: The annual earnings announcement season begins Tuesday with numbers from Infosys Technologies and HCL Technologies set to hit the market. But analysts' are more tuned to see what the companies are likely to say about the future.
   Industry analysts say IT companies are likely to put forth a modest revenue guidance, and some may do so only for the half year, "as they lack clarity beyond more than the first two quarters". Recessionary trend in the US — the biggest market for Indian IT companies — is expected to impact the companies' revenues and bottomline.
   "Discretionary spends on technology by customers will be put on hold for some time. Lengthening decision cycles or calling off of some deals are also likely. But 'keeping the lights on' kind of m a i n t e n a n c e work may continue with the possibility of re-negotiated or lower rates,'' said an industry analyst. So the future "market handling" rather than the usual revenue numbers from the IT companies will be the major focus area this quarter, another IT analyst said.
   Going forward, for the software companies the likely areas of concentration could be cost rationalization, expansions to emerging market locations to cushion slowdown in business from developed markets, higher employee utilisation, streamlining the bulge-mix (more freshers as against experienced people) and M&As.
   "Whatever may be the earnings for this quarter, across the IT industry the stress is going to be on compressing the cost of running operations," said Mohanlal Menon, MD, Sentient Consulting, a corporate strategy advisory firm. "There could be announcements of geographical expansion to emerging markets and exploring fast-growing, highvalue niche verticals. There could also be announcements about initiatives to offset the negative global impacts.''
   According to Jamil Khatri, head of US GAAP & IFRS Services in KPMG, the industry would see the impact of the US slowdown after some months. "It's only after June or September that we will see the emergence of the impact of the US recession. Till then we have to wait and watch for clarity.''
   Sudin Apte, country head of research firm Forrester India, said, "We will see an impact on growth and profitability. The quarter will definitely be tough. As for the future, there could be more outsourcing of work to India.''
   In short, fiscal 2009 will be another year of multiple strategies in order to improve margins and profitability, which have already been hit by the appreciation of the rupee against most major currencies.
Times of India – 21st March 2008

Recession concerns pull down IT salary hikes, attrition

Bangalore: Young technology professional Rajesh Talukdar was expecting a salary hike of 30% this year. His hopes were punctured last week when his team head indicated that none in his project would get double digit increments and also that some would not even be considered for a hike.
   Industry observers say the IT sector is heading towards a recession which would be worse than the one it had witnessed during the dot.com bust days.
   "Over 60% of the industry is US-centric. Recessionary trends are becoming visible across Europe as well. The economic depression of 2001 was mainly due to a tech meltdown; today the recession is global and across verticals. So it will hit the industry harder and it will last longer,'' says Mamtha Jain, an independent cross-border business analyst.
   In recent years, at least 30% increment was given to the top 5% of the employees. This is now expected to fall to less than 15%.
   About 20% increment was given to 20% of employees, which now is expected to fall to single digits. About 50% of the people used to get 10% increment; they may now get a marginal hike. The final 25% may get no increment at all.
   According to Mohan Menon, MD, Sentient Consulting, a people acquisition advisory, only a few brave companies will give doubledigit increments. "For performers, increments will be in the range of 8% to 12%. Apart from the recession, it's also the election year in the US and hence a lot of decisions are being put on the back burner,'' Menon says.
   The industry was planning an "increment correction'' in India even before any sign of a recession was visible. "The annual increments were expected to slip into single digits in the next couple of years. But looks like it's already happening,'' said Madhav Sharma, staffing head of a tech firm.
   Some enterprises that followed a six-month appraisal/increment regime are moving into an annual mode. "It saves them substantial cash and time in terms of processing,'' said the HR head of a tech firm.
   The slowdown in hiring and lower increments are having an interesting by-product. Techies who used to flaunt three or more offer letters at a time a quarter ago, are finding it tough to find attractive options outside.
   The attrition levels in many cases are said to have fallen by half, from an average of 22 per cent previously. "This has brought a lot of respite for HR heads," said B S Murthy, CEO, Human Capital.
Times of India – 14th January 2008

Fresh Look

Rookies rule the roost today. As the scramble for talent gets intense, fresh graduates have emerged as the most sought after community in the Indian tech marketplace.
   Pravin Sood searched for more than a year before he landed a technology job, after his graduation in 2002. His younger brother Navin, currently a final year engineering student in Andhra Pradesh, already has job offers from two leading tech firms. "As a fresh grad, I was often asked by HR heads to get some experience elsewhere and come back. I would fight back, and ask them how I would get experience, if no one hires me?'' recalls Pravin, who's now an analyst with an MNC.
   Today, however, it's a different world. Like with Navin, before you've completed your graduation, you are likely to have job offers on hand. And we are not talking only about graduates from leading colleges. Tech firms today are stocking up as many fresh grads as they can, from a wide range of institutions.
   Recruiters who didn't previously look at more than a dozen colleges in Karnataka today recruit from almost all of the 124 colleges in the state. About 30 of the colleges are visited directly by the recruiters. Recruiters also visit 300 of the country's 1,400 colleges and don't hesitate to recruit from the rest either.

Cost cutting

This new-found love for freshers isn't difficult to understand. Last year, when the rupee appreciation started hitting tech firms hard, TOI had reported that most of these firms were considering putting a greater focus on hiring freshers to lower costs. That's indeed what's happening now.
   The cost pressures on IT companies have been huge and relentless. The rupee appreciation apart, there has been the issue of soaring salary costs. The cost of an employee rises dramatically once he/she achieves two to three years of experience.    So going forward, about 50 to 70% of the total people base is expected to be in the 0 to 2 year experience category. Recruiters say that those leading the wave of fresher-hiring are firms like Infosys (which has given 18,000 offer letters in campuses this year), TCS, Satyam, Cognizant, Wipro and HCL, with MNCs joining the bandwagon selectively.
   "Companies with outstanding training capability and infrastructure have already gained big out of this and have stayed extremely competitive despite the cost pressures,'' says B S Murthy, CEO of recruitment firm HumanCapital.
   Mohan Lal Menon, MD of Sentient Consulting, a people-acquisition advisory firm, says high-volume hiring of freshers offer two kinds of liquidity advantage to enterprises: "It saves them from high operational costs involved in acquiring skilled talent. It also creates talent liquidity within the enterprise, so that they are better equipped to handle project flows and delivery schedules."    He says that even with the cost of training and education, the economics of hiring freshers works very well for enterprises compared to hiring readyto-deploy talent. "More than the cost incurred in training and education, it is the cost of the opportunity lost that is critical,'' says Menon, who is also on the board of several large tech firms.
   Anand Adkoli, CEO of e-learning firm Liqwid Krystal, says a constant inflow of talent is crucial for the quantum growth of the industry. "Also, freshers are hungry to learn. They do not have pre-set minds, so it is all the more easy to train, teach and groom them for specific requirements," he says.
   "It makes resource allocation easier," says Nirupama V G, MD of recruitment firm AdAstra, explaining the mass hiring of freshers. "Companies will not land into emergency situations. They also get time to prepare people for specific functions.''

Turning freshers billable

But most freshers are not immediately billable (cannot be put in projects). According to Forbes Asia's December 24 issue, only 15% of India's 2.3 million graduates are employable. It also projects a talent shortfall of 1,50,000 by 2010, against Nasscom's shortfall outlook of 5,00,000 by that year.
   Over 30% of the people in the IT industry are non-computer science or nonelectronics engineers. HR experts say India could be the only country in the world where a large army of non-IT grads are being cultivated and morphed for IT jobs.
   This involves heavy investment in training and education infrastructure. Infosys today owns the world's largest independent corporate training facility in Mysore and other locations, set up at a cost of Rs 1,650 crore. "The industry is playing a game of scale. Training, educating and grooming are the key words, because no other means can create billable talent,'' says T V Mohandas Pai, head, training & education, at Infy.
   TCS, which even hires non-grads, has a large training school in Thiruvananthapuram. Cognizant Academy trains well over 10,000 freshers each year; about 65% of the company's annual recruits are now freshers from campuses.
   IBM, Accenture, CapGemini and EDS also have training programmes that they run independently and in partnership with academia. MindTree Consulting is currently in the process of training its 1,000 campus recruits.
   Puneet Jetli, head of people functions at MindTree, says campus hiring is a critical factor for the company's overall recruitment strategy: "We want to maintain a good balance of the people pyramid. This will keep our overall cost under control. Campus/fresh hiring accounted for almost 60% of our hiring in the last couple of years and this will continue.''
   However, he thinks the next fiscal will see a new trend emerging in the fresher-recruitment space. "Instead of today's mass inductions, companies in the future are likely to stagger the onboarding of fresh talent to ensure constant inflow, to reduce the ratio of benchsitters and also provide efficiency training,'' he says.
   The industry may also move into a consolidated approach of assessment and grading by routing these processes through Nasscom-promoted grading and hiring systems. "This will make the catchment area wider and larger," Jetli says.

Flip side

But there are some who are worried by the excessive focus on freshers. A Wipro manager who has been mandated to recruit more freshers into his team wonders whether quality aspects would take a beating in the future. "Despite all the training, they are unlikely to be as good as people who have actually worked on projects. With more freshers, we could have situations where projects are delayed or deliver projects that have more bugs in them, with serious repercussions," he says.
   Also, with everybody jumping into the fresh market, fresher salaries are expected to go up more than it has in the past few years, negating some of the benefits the strategy is expected to bring.
   "There is a quantum jump in the number of freshers hired during this fiscal. This has put huge pressure on the talent supply chain, creating a scenario where the size of salary has become the sole deciding factor for freshers,'' says Amitabh Das, CEO of recruitment firm Vati Consulting.
   Companies doing high-end work are said to have raised entry-level salaries this year by 30%, taking it to Rs 6 lakh and more per annum. High-end application development firms have hiked salaries by 15% to between Rs 4 lakh and Rs 5 lakh while certain services firms are seen to have effected a similar hike to bring salaries in the range of Rs 3.5 lakh to Rs 4.5 lakh.    In other words, freshers may soon bring on the same concerns that experienced employees have. Unless India can quickly ramp up the spread of education and the employable pool.