Thursday July 19, 02:03 AM
Stung by rupee, TCS, Infy raise manpower utilisation |
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To counter the dip in profitability due to an appreciating rupee, Indian software majors are increasing utililisation of manpower for quicker execution of projects and adding manpower for entry-level and high-margin work.
While announcing the first quarter results, Infosy CFO V Balakrishnan said utilisation rates at his company have gone up by 2 per cent in the quarter to 75 per cent. Similarly, TCS CFO S Mahalingam said during the company's results presentation that utilisation rates for his company have gone up from 78.2 per cent in 2006 to 79.4 per cent in the first quarter of fiscal year 2007. Mumbai-based Hexaware Technologies has seen utilisation rates move up from from 70.7 to 73.7 per cent.
This means that projects undertaken by IT companies would be executed at a faster rate and extra services would be delivered on top of existing ones.
"Utilisation rates are bound to go up as the year goes on," says Mahalingam.
Infosys COO S.D. Shibulal said that a 5 per cent additional increase in manpower utilisation could offset an anticipated hit from the rupee appreciation. The third-largest software exporter, Wipro, is yet to announce its first quarter results, but analysts predict that the company too would up its realisation rates.
Since January, the rupee has appreciated against all major currencies such as the US dollar, the euro, pound sterling and the yen. The rise has been the most significant against the US dollar - about 9 per cent. This has impacted profitability of IT companies. Currently, top Indian IT companies derive about 60 per cent of their revenues from the US.
Companies are on a hiring spree to put more people on projects ranging from application development maintenance work to consulting business. TCS and Infosys are also negotiating with their existing and new clients for higher billing rates. "We are negotiating 3-5 per cent higher fees for both our existing and new clients," says Mahalingam.
IT majors are also ramping up headcount with TCS and Infosys adding about 58,000 employees for 2007-08. Some analysts are sceptical about this headcount increase. "Merely throwing people at projects won't be the answer and companies need to take a deeper look at quality delivery if they are to command higher prices," says Pradeep Mukerjee of Tholons, an offshore advisory company. "Companies should look at higher utilisation rates for high-margin projects such as consulting," says Arup Roy, senior research analyst, Gartner.
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