Time for consolidation of indian IT Companies has arrived

Indian IT industry has withstood the 2008 recession well, All thanks to the cash pile and the margins and the meager pay salaries over the last two years, The reason for coming out even strongly is the cost cutting measures ranging from sending fewer people on-site, some price negotiations, giving no salary hike for two consuctive years to employees(on name of recession), firing people secretly(so that stock does not plummets) etc, etc, this list goes on.

Putting together these all measures have been very good for the biggies in Indian IT industry like - TCS, Infosys, Wipro etc. These companies have lots of people on their bench hence lowering the bid price in recession time helped in increasing the percentage of billed employees.

This above scenario has not been possible for mid tier IT vendors like, Patni, Tech Mahindra, Mastek all of them still showing decrease in profits YoY, The reason is simple The biggies of Indian IT are eating their food by bidding at the same price of these mid tier companies, thus taking even smaller projects on which the mid tier IT Companies depends. Since the potential client is now well aware of these biggies they prefer to give new projects to these rather then mid tier companies which is the biggest area of concern for these smaller companies.

They can't compete with these biggies thanks to the bench strength and the cash pile of these bigger companies, Now in such a scenario where there looks no hope for smaller and mid tier IT Companies, the best method for coping is to be acquired by the biggies or bid to these biggies at even lesser rate for further outsourcing(looks rare possibility as margins are already wafer thin), adding further to IT companies owes is the increase in Visa fees by US Government.
Thus after Indian IT comes out of the recession completely we can possibly see consolidation in Indian IT space. This would definitely help in making global companies which can compete with likes of Accenture, IBM much more efficiently and effectively. Hence it would not be surprise if news about one of the biggies acquire a mid tier or smaller IT companies which would definitly help in the niche domains where the smaller IT companies work.

Hence I can conclude that time has finally arrived when we can see consolidation in indian IT industry which would definitely make Indian IT companies competency even bigger and more powerful. thus offering some serious competition to US biggies like Accenture and IBM.

Reason how infosys showed 35% YoY profit amid slowdown

Infosys (Nasdaq INFY) is second largest exporter of software and services of India and represents Indian INC's at global level thats nice stats actually recently Infosys posted a 35 percent rise in profits for 3rd quarter when compared to corresponding quarter last year, I always wondered how a company can show such rise in profits in such a weak market which is prevelant all over the world so i thought to go inside the working of the software exporter to see which manegerial decisions are backing such increase in revenues where all the other companies are reeling amid financial slowdown which started as mortagage crises in US and now has engulfed all the major economies into recession and there is prevelant danger of deflation all around the world.

i do have friends in infy too so this is not only my opinion and has inputs from infy related people too so it can't be mistaken. Almost all the indian software services companies are making bucks on projects in which clients (mostly of US) pay per person per hour basis and according to resources indian companies charge anywhere between $15 - $20 per hour per person from it's clients sitting in US . This figure is very minimal for the clients which otherwise have to pay atleast double the amount if they hire in US itself.

Also Read :
-Effect of Recession on Indian Economy
-Economies hit by recession
-Plan for World Economy Revival
-World's Strongest economies list
-US Economic recession-how it started

most of the IT companies love to get projects where client pay on per person per hour basis including Infosys, TCS, Wipro and many other's which are serving US on 24*7 basis, other type of proects which are fixed capital projects contribute less then 20% of almost all the indian IT companies, Indian IT companies get minimum US $ 15 (pph) however they give barely $2 per hour to employee ($2 = INR100) roughly so the rest $13 goes into pocket of Indian IT companies so the profit margins for infosys are huge.

I always wondered how a company with 30/100 employees always on bench can get that profits, It may also be noted that the employees on bench are very important for indian IT cos to get new projects because they have to show to potential client about the headcount in order to get new projects, one of my friend told me that there are certain cases in which Indian IT cos show employees that are working in fixed capital projects into the time manpower projects in order to get more bucks from the foreign clients, So it is clear thatIndian IT companies pay salary of over 1 lac employees from ~70000 employees which are billed and rest 30k employees are kept as reserve for showing to potential clients that ther is adequate number of employees of various technologies required by the clients.

Move 1 by managment of Infy : they have made it mandatory for a team to work for atleast 1 saturday or sunday per month. and employee can take any one day off any time in a month but has to come on saturday or sunday on which whole team is working.
Effect - One billing day for client increased and all the employees will never go on leave for the same day of the month so in all one working day increased compulsary in the month so that company can charge the client for that saturday or sunday.

Move 2 - Now what infosys is doing presently is putting more work pressure on already billed employees (which are paid on per hour basis) to work more, recently infosys increased the working hours of employees from 8 hrs a day to 9:30 hrs(exact time changes may differ) now these employees are billed on per hour basis at a whopping amount of minimum $15 per person/hour. So add to it 1:30 hrs more per person per day and multiply it with total number of employees billed in similar manner(25*70000 extra) client has done contract for a fixed period which can,t be changed now, so the revenue per employee has increased however number of employees have not increased neither there is any fall in number of onbench employees (in order to get new projects) This might be a good manegerial decision at this time when there is economic slump and not much openings in much companies so employees of infosys can't do anything rather then working inhuman number of hours in their cubical and Infosys is making much mileage from market employment condition without thinking about the employees , It may be noted that policies of infosys have never been employee favourable and they want to suck even last drop of blood from their employees so that they get $ 15- $30 per hour more /employee from the client. Poor infoscians i guess but they have no other options in present market situation.

Also Read :
-Effect of Recession on Indian Economy
-Economies hit by recession
-Plan for World Economy Revival
-World's Strongest economies list
-US Economic recession-how it started

also there are other cost cutting steps going on in infosys like stationary products cut etc, there is only minor difference between infosys and TCs that is only that infosys management love to call media and give one or two statements on daily basis so that brand value is mantained but i think they should care more about the employees working for them rather then giving statements to media on daily basis, I have never seen any of the other IT companies making such hype of their company, i mean TCS is even bigger then infosys in each and every aspect. we'll thats a nice publicity stunts done by infy management without giving a penny in advertisements, however i think they should do more work in reducing the high attrition rate prevelant in their company. so that was the difference between infosys and TCS, TCS (rather whole TATA group does most work rather then speaking in public on daily basis and taking everything out of employees).

And one similarity between Infosys and Fraud affected company Satyam is that in both of the companies promoters are not the owners of the companies , ie they can't do anything on their own, TCS and Wipro are placed very firmly on that aspect as the promorters own majority stake of the company and are real owners of the companies.

So I end this post here as i wanted to clear the reason why and how Infosys have managed to show 35% YoY growth of revenues. hope it's now clear to you about the working of infosys especially in this slowdown.

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