American Airlines saved $40,000 in 1987 by reducing one olive in its meal. Big deal! Indian outsourcing firms are now saving hundreds of crores of rupees by cutting down on frills and setting cost benchmarks on everything from power consumption to employee pick-up services to the optimum size of work area.

India’s top software firm Tata Consultancy Services (TCS), for example, saved Rs 250-300 crore by reducing wasteful expenses in the previous financial year.

Business process outsourcing firm WNS Global Services, which acquired UK insurer Aviva’s captive operations Aviva Global Services (AGS) last year, improved its margins from 10% to 14% largely through more efficient space utilisation and benchmarking of employee pick-up costs.

“Given the cost pressures on outsourcing vendors, I see a big push on benchmarking. These vendors are saying: what are the benchmarks on, say, power consumption per square feet and how do we fare against our competitors,” says Alok Shende, principal consultant, Ascendia Consulting, an advisory firm based out of Mumbai.

According to him, companies are targeting overheads — travel, employee pick up, allowances and canteen facilities.

TCS started the exercise of reducing excess costs in April 2008 when its top management realised that 2008-09 was not going to be a robust growth year with the world’s largest economy, US, showing signs of a collapse.

The austerity drive started with the most obvious and noticeable excesses. “We found that on Saturdays and Sundays the staff buses were running almost empty but would make the same number of trips. Also, when executives were going for meetings or to interview candidates, they would travel by separate cabs,” says S Mahalingam, chief financial officer of the company.

Now there are fewer bus trips in the weekend and when two or more executives travel to the same place, they share the cab. The type of cab that can be requisitioned has also been standardised.

“We looked at simple things that hit you in the eye such as if you need a security guard on each floor. In general, we looked at each (expense) item and if we could improve controls on them,” adds Mr Mahalingam.

Similarly, when WNS acquired Aviva Global, critics said there was little scope to improve margins since the latter’s entire operations were based out of India and WNS couldn’t take advantage of the onshore-offshore cost arbitrage. But WNS proved the detractors wrong by improving its margins by targeting frills.

While the average space for each seat in AGS facilities was 125-130 sq ft, WNS brought it down to the standard 75-80 sq ft. This along with the flexibility of being able to use the empty seats for new customers gave its significant cost efficiencies, says WNS CFO Alok Misra.

If you look at the cost per seat, two-thirds are contributed by items like false ceiling, air-conditioning, lighting, carpeting and generator. And one-third is contributed by items like table, chair and workstation. Since the first part (false ceiling, air-conditioning, etc) was already there, we had to incur only an incremental cost to add more seats,” says Mr Misra.

In other words, the company was able to add new seats at $2,000-2,500 instead of $7,000-8,000.

It was also able to negotiate better terms with its vendors and get volume discounts on bandwidth and employee pick-up services — both big cost heads for a BPO operation.

Such initiatives, although triggered by the downturn in the US and European markets, are more than ad hoc cost cuts. They will help the firms run more efficient operations and emerge more competitive in the long run.

For instance, WNS has put in place a centralised software to automate its employee pick-ups. Using this, the company can benchmark the prices of vendors in different centres and cities. So, if a vendor providing employee pick-up services in Chennai is charging more than a vendor in Bangalore, then the company can use the benchmarked data to negotiate lower rates with the Chennai vendor.

TCS has started a structured, mammoth exercise to track expenses across its numerous centres in India and overseas under four categories: infrastructure-enabling, management-enabling, employee-related and customer related activities.

The results will ultimately help the firm set some benchmarks and, Mr Mahalingam hopes, also arrive at the most efficient size for a delivery centre. The trend could catch on in the industry with other outsourcing firms evolving their own methodologies to cut costs.

The country’s third largest exporter, Wipro, has reduced 28 buses and 161 cabs from locations across Bangalore by using scheduling algorithms and routing mechanisms.

Bangalore-based MphasiS, now majority owned by Hewlett Packard, is also implementing steps to improve operational efficiencies. “We asked our employees for suggestions, and I was humbled by the kind of responses we got. Sometimes the simplest suggestions are the ones with the maximum impact,” MphasiS CEO Ganesh Ayyar told ET in an informal chat.

Patni Computer Systems is also looking at consolidating its facilities. “For example, if we have two floors in one building and one floor is only half occupied, we could look at moving it with the other,” CEO Jeya Kumar told ET in an interview recently.

Clearly, if efforts in this direction continue, Indian outsourcers will emerge much more competitive after the recession. They will be leaner and smarter (and perhaps, a trifle meaner as well) in the days to come.

source: The Economic Times

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Headcount @ IT cos: Up, down or static

The past few quarter have been trying for IT companies. With IT chieftains like Wipro CEO Azim Premji terming financial year 2008-09 worst-ever. The year seems to be worst for IT companies on hiring front too. Other than pinkslips, previous quarters also saw a plunge in hiring at all IT companies. In fact, the last quarter ended March 2009 saw most tech companies either reporting a decline in total number of employees or retaining the same number. Not even five IT companies reported a marginal increase in their total headcount during the quarter. Here’s taking a stock of the total employee numbers at the leading IT companies in the past quarter: where the headcount remained same, where headcount declined and where headcount saw a marginal hike.

Wipro (headcount decline in IT services)

India’s third largest IT services provider said it had 97,810 employees as of March 31, 2009, which included 74,986 employees in IT services business and 22,824 employees in BPO business. This represents a net addition of 845 employees comprising a decline of 401 employees in IT Services business and an addition of 1,246 people in BPO business for the quarter. The company had 96,965 employees as of December 31, 2008. Pratik Kumar, head of human resources, said that the company won’t increase salaries in the current fiscal year.” On deferring the pay hike, Premji said this was being done to minimize expenses. During the third quarter of fiscal 2008-09, Wipro’s employee headcount in the IT services business went down by about 1,100 as compared to the earlier quarter.

Patni (headcount went down)

The Pune-based Patni Computer Systems saw its employee strength at 14,540 as on March 2009, down 354 from the previous quarter. As of December 2008, the company had 14,894 employees. Jaya Kumar, Chief Executive Officer, said, “The demand environment continues to be challenging in the short run, however, we are investing for portfolio expansion in all areas. Long-term growth prospects of the global delivery model are robust. We will see the benefits of our financial health in further enhancing sustainable differentiation of our strategy.”

Tech Mahindra (headcount went down)
	The new owner of scam-hit Satyam Computers employee strength stood at 24,972 as of March 2009 compared to 25,429 in December 2008. The company ended the quarter with 457 fewer people on its rolls. However, the company said utilisation improved to 70 per cent, from 67 per cent.

Hexaware Technologies (headcount went down)

The provider of IT and business process outsourcing services, Hexaware Technologies for the quarter ended March 2009 saw employee strength at 5,296 as compared to 5622 in quarter ended December 2008. This means that the company saw net reduction of 326 employees, down 5.8 per cent from the previous quarter. Hexaware has implemented a virtual bench programme for 250 of its employees as well as salary cuts for all senior and mid-level employees. The company is cautious but optimistic about the hiring trend in the following two quarters. Says Deepak Chumble, Chief People Officer, “Hexaware’s headcount “will not go down drastically” in subsequent quarters.” The future is uncertain and there is a possibility the situation may not improve even in third or fourth quarter,” he added.

Mastek (headcount went down)

Mumbai-based Mastek’s employee base stood at 4,023 as of March 2009, down 220 from the previous quarter. The company reported 4,243 employees as of December 2008. To tide over the economic downturn, the company has introduced the concept of a virtual bench. Employees on the virtual bench would receive only a percentage of the salary and receive training on various technologies during that period. The identified employees could opt to be on the virtual bench or receive a severance pay and leave the company. An overwhelming 85 per cent opted to stay. Company’s HR head Kalpana Jaishankar said that it wasn’t that they were poor performers, this was a business issue and we wanted to make that clear.

Zensar Technologies (headcount went down)

Zensar Technologies saw its employee strength at 4,684 as of March 2009, less 250 as compared to the previous quarter. As of December 2008, the company’s employee base was 4,934. As for what reason the company points — During the quarter ended March 2009, the company’s big domestic voice BPO project came to an end. So the company relieved 250 people working on the contract. Ganesh Natarajan, Deputy Chairman and Managing Director, Zensar Technologies, feels that attrition levels in the industry have come down so drastically that one does not feel the need to hire.

Polaris Software (headcount went down)

Chennai-based Polaris Software saw headcount at 9,238 as of March 2009, down 649 or 6.5 per cent from the previous quarter. As of December 2008, the company’s employee strength stood at 9,887. However, Arun Jain, Chairman and CEO, Polaris Software Lab, said the company would be hiring at least 150-200 every quarter depending on the business need. Opting for just-in-time hiring, he said, Polaris does not recruit so many people.

TCS (headcount went marginally up)

At the end of fiscal 2008-09, TCS employee count stood at 143,761. The fourth quarter ended March 2009 saw a net addition of 13,418 employees to the company’s resource pool. As of December 2008, the total employee base stood at 1,30,343 professionals. According to Ramadorai, the company made 24,885 campus offers for 2009-10. The company added 48,595 employees in the year. As for attrition rate, Ajoy Mukherjee, vice president and head, global human resources, TCS, said, “The attrition rate is at 11.4 per cent. The utilisation rate (excluding trainees) has been maintained at 79.7 per cent, while the utilisation rate otherwise is lower at 69.4 per cent.” The company expects to add only about 16,000-17,000 new net hires, about half the number in the previous year.

Infosys (headcount went marginally up)

Infosys Technologies said that it has hired close to 5,000 employees in the first three months of this year, but net additions were just 1,772 to its headcount after taking into account attrition and other factors. The total headcount of Infosys and its subsidiaries stood at 1,04,850 employees as on March 31, 2009. “During the quarter, Infosys and its subsidiaries added 4,935 employees (gross). The net addition during the quarter was 1,772,” it stated. The company had close to 1,03,078 employees as of December 31, 2008. Infosys Head, HRD and Education & Research TV Mohandas Pai said, “The year ahead would be challenging on the people front. Our continuous investment in capability development, training and certification would make us more competitive. We have tightened our performance management system to create a more focused workforce.” The company said that it plans to hire a gross 18,000 employees in 2009/10 and there would be no job cuts despite the slowing outsourcing momentum.

MindTree (saw headcount going up)

IT services firm MindTree added people on a net basis during the quarter, taking the employee strength to 7,866 as of March 31, 2009. As of December 2008, the company had 5,826 employees. The company plans to add another 250 by October this year. MindTree executive chairman Ashok Soota said, “Our new organisational structure and focus on new business areas will help us withstand the economic crisis and continue on our path to become a $1-billion organisation.”

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