Global recession cuts costs of India's IT sec

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IT sector
Bangalore, Oct 23: Global recession trends and weak dollar has hit India's Information Technology industry with many companies resorting to cost cutting measures.

The key challenges faced by the industry now are inflation and the psychological impact of the US crisis, leading the companies to hit the panic button. Though analysts feel, recession is a short-term phenomenon, it still has taken a toll on the industry. Bonuses, perks, lavish parties, and many other benefits are missing as companies look to cut cost.

Many feel, that the cost cutting is not being done in a democratic manner. It is the lower management, which bears the major brunt of it. Unions say cost cutting should be across the board.

"Somewhere down the line, if you are planning for a cost cutting, it should be across the board. Everybody should participate, from CEO, who gets the biggest pay cheque, to the last man in the line, the office boy. Everybody should be involved and they should say that, we are going through this problem. Our revenue has dipped by so much, and so this necessitates so much of cut. So across the board, we are cutting so much, then it is democracy," said R. Karthik Shekhar, Secretary General of Union for Information and Technology Enabled Service India (UNITES), Bangalore.

Despite reports of companies laying off some of their employees as a cost cutting measure, they have been at the same time advertising seeking new employees, which Shekhar feels is a faĤade to camouflage the company's actual financial condition.

"I'm sure nobody wants to have a huge bench strength, so they would probably try to cut cost. But, at the same time when you are cutting your bench strength, it is very imperative, that the same firm is also advertising in paper for recruiting new people. So is it that the advertisement is only aimed at the stock market. We are hiring because we have projects and we are firing because we have to," said Shekhar.

India's IT export growth could be slower than its July forecast of a 21 to 24 per cent rise to about 50 billion dollars in the financial year ending March, lobby group National Association of Software and Service Companies said last month.

Europe and Asia are big clients of Indian IT companies such as Tata Consultancy, Infosys Technologies, Wipro and Satyam Computer.

Some outsourcers may cut their dollar revenue forecasts due to a downturn in the U.S. market, which contributes more than half their revenue, analysts said.

Indian IT firms have also been expanding in Europe and elsewhere to cut their U.S. dependence.

But the risk of global recession is a worry for the sector, which has been used to a scorching pace of growth.


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