Indian IT majors cut onsite staff

Source: Silicon India
Bangalore: Suffering to counter the economic slump, Indian IT majors are now reducing the number of onsite work force as many major customers tend to cut their IT budgets and focus more on offshore projects to bring down the cost. Largest IT firms in India such as TCS, Infosys and Wipro are cutting back onsite employees between three to five percent and even more depending on the projects, reported The Economic Times.

Based on the new trend, onsite roles like manager, requirement analysis professionals and tech employees involved with development of technical specifications with a customer are being brought offshore. "The customers are asking for more savings, attempting to have fewer people on projects wherever possible. We are obviously under tremendous pressure to bring back these roles offshore," said a Senior Executive involved with delivery of projects at a top Indian tech firm. As offshore works from countries like India need billing rates which are less than half of the costs in U.S. and UK many major outsourcing customers such as GE, RBS and Bank of America plan to focus on offshore outsourcing. "We will have to move more work offshore, and the question really is about how much more we can deliver remotely," said Sambuddha Deb, Chief Global Delivery Officer, Wipro.

Recently, RBS has cut down the number of onsite staff in UK by almost one third, and expert says that the company has relocated many employees at its Indian captive center. RBS is also pushing Infosys, to which the Bank gives work to outsource, to do more from offshore centers and is also shifting more positions to its captive center in Delhi.

Industry officials had earlier mentioned that Indian offshore vendors could bring back hundreds of professionals from the markets of U.S., UK and other European countries. A top executive, who requested anonymity said, "Each of us (top five Indian tech firms) have few thousand professionals working onsite, the pressure to move offshore will result in over five percent reduction of onsite exposure, which might come down to around 10 percent, from 15-20 percent currently."

Moreover, the Indian outsourcing firms are also under pressure to consolidate dedicated offshore delivery centers. "With customers now slice core and non-core work, they are looking at ways to reduce the total number of professionals being billed, thereby putting pressure on the dedicated centers," the executive who did not wish to be quoted said.

Customers have now begun to ask about the total number of people work in a project. "We are now receiving queries about the exact number of people working on a project apart from many other specific details, which the customers never asked," pointed out a Manager with a leading offshore firm based in UK who did not wish to be identified.

New strategies adopted by foreign customers are expected to affect the revenue of Indian IT majors. "Infosys' EBITDA is expected to decline from 31.4 percent in 2008 to 23.6 percent in 2011, while TCS could see its margins go down from around 26 percent last year to 18.2 percent over next three years. Wipro is also expected to see its EBITDA decline from around 20.1 percent last year to 13.5 percent by 2011, finds an Anand Rathi Research.