IT industry hit by shortage of projects from Europe and US

Top Indian information technology companies will add to their already bloated bench strength in the coming quarters, as the $100-billion domestic industry battles a slowdown in projects from the West, its biggest revenue generator, and employees are left without work.

According to industry watchers, shortage of projects from Europe and the US has forced software engineers to sit without projects for more than six months now, and utilisation rates could dip further with new campus recruits joining the workforce from this month.

“Barring a few quarters, projects have slowed down considerably in the last few years. While earlier clients would be ready to pay for the number of employees required plus for 20 per cent more, now they are not, leading to an inflated bench,” said Amitabh Das, chief executive of Vati Consulting, a recruitment firm. There is uncertainty in the market and it could lead to retrenchment, Das added.

A bench in business parlance is the number of employees a company keeps ready to fill vacant positions. For an IT company it is typically about 15 per cent of the workforce, which can exceed 20 per cent in the case of large firms. Bench strengths were rationalised after the 2008 recession.

A comparison of the employee utilisation rates across top IT companies shows a steep decline over the last six months. This is expected to worsen in the coming quarters as new recruits join the workforce from this month onwards.

“The economic environment, pricing pressure and decreased employee utilisation rate could impact revenue and operating results,” said the annual report of Infosys Technologies, India’s second-largest IT services firm. Infosys is expected to further cut its sales guidance for the year, news agency Reuters reported on Monday.

“Hopes of a recovery in the second half are just that, hopes,” said Apurva Shah, head of research at BNP Paribas MF.

Angel Broking’s analyst Ankita Somani said that while TCS, Wipro and HCL could see their utilsation rates inch up a bit because new employees join only from this month, Infosys could see a dip as its new recruits joined a month earlier.

(curtsey: economic times)

Rupesh Yatesh Dalal
Head Research Department


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