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Raja Simhan T.E.

CHENNAI, May 17

INDUSTRY slowdown plagued the fiscal year 2001-02 for most of the Indian IT companies, compared to a spectacular run the previous year.

And, to overcome the `severe' industry slowdown, one of the first things that companies did was to cut down staff cost. The measures included salary cut or trimming staff strength or both.

Various media reports said most of the IT firms in the last year have cut back perks, bonus and hikes to employees. There was a freeze in fresh recruitment, due to drop in new projects, and the bench (employee buffer stock) was exhausted. If this was the trend, then there should have been a major reduction in the staff cost for the software companies, at least for the top few.

On the contrary, the top IT firms have in fact increased their staff cost during FY 01-02, compared to the previous year, show figures collated by Business Line of the top IT firms (in terms of total income). Out of the top 10 software firms, nine increased their staff cost during FY 01-02 compared to the previous year, the figures say.

The staff cost of industry leaders such as Infosys, Wipro and Satyam have increased substantially during FY 01-02, compared to the previous year. Infosys' staff cost went up to Rs 1,117.86 crore in FY 01-02, as against Rs 717.78 crore the previous year. Similarly, for Satyam the staff cost went up to Rs 789.06 crore (Rs 486.46 crore) and for Wipro it was Rs 508.40 crore (Rs 421.80 crore).

Says a city-based IT analyst, many software companies give increment in mid-third quarter and hence the fourth quarter staff cost tend to be higher than the previous quarter. Further, in the last 18 months, companies were not hiring at entry level, only laterals, with experience, and coming at a higher cost. Further, no big company has cut salary. If at all, they have only made the increment/incentives variable and linked to company's performance.

According to a Mumbai-based analyst, the onsite revenue has not necessarily dropped for all the software firms, especially because the package implementation (such as ERP and SAP) revenues have increased and a larger portion of these revenues are booked onsite.

A similar view was also expressed by a spokesperson of a city-based IT firm. On companies showing reduced staff cost, a city-based IT company official said after the slowdown in the software industry, onsite projects for most of the software companies reduced in the last three quarters, while the off-shore business increased — as most of the US-based companies started outsourcing their applications in a big way.

This, in turn brought down the staff cost, as the firms pay the employees in rupees, and not in dollars. For instance, Polaris Software Labs' staff cost reduced to Rs 32.24 crore during March quarter 2001-02, compared to Rs 40.76 crore the previous quarter.

However, on a year-on-year basis, the company's staff cost went up marginally to Rs 148.99 crore during FY 01-02, compared to Rs 145.41 crore the previous year.

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