Infosys To Hire More; TCS To Absorb 12,500 From CGS
DESPITE the grim environment, both Infosys Technologies and Tata Consultancy Services (TCS) have opted for strategies that anticipate a recovery after about two quarters. While TCS will add nearly 12,500 employees of Citigroup Global Services (CGS), Infosys said it would hire about 25,000 people in FY09 and honour all the commitments made at campuses. While 11,000 employees have already joined Infosys this year, another 18,700 are expected to join before the fiscal end, officials said following the announcement of quarterly results on Friday.
“The bench (the number of employees not working on billable projects) is going to remain large for sometime.... The challenge is to keep them engaged,” Infosys director Mohandas Pai said. The company admitted that utilisation would come down but that it would be able to maintain margins. Top management officials said the company had enough money to sustain them in such difficult times.
“We don’t go back on any of our client contracts. We have recurited the best and the brightest from colleges — we will need them when the market recovers. In any case, the training will take 4-5 months,” chief operating officer S D Shibulal told ET.
To keep these employees engaged when there are not enough projects, the company will have to deploy them on internal projects that will not earn immediate revenue. The company’s utilisation has already fallen to 74% from 78% a year ago because of fewer projects. Normally, the second quarter is among the better quarters because there are more billable days and fewer increase in costs compared to the first and third quarters.
The guidance given by Infosys also seems to suggest it expects a recovery in the fourth quarter of the fiscal. Based on the figures put out the company, it expects flat sequential growth in revenues and marginally better growth in earnings in Q3 FY09, but a whopping 18% sequential growth in revenues and 14% growth in earnings in Q4 FY09.
However, an analyst ET spoke to had a different view. “If you ask me, the bottom is yet to be reached. This is only the beginning. Infosys can maintain margins even if utilisation drops because it is so big. In any case, freshers are not paid much so it won’t impact margins significantly,” he said.
TCS has also come in for criticism for acquiring Citigroup Global Services and increasing its exposure to the troubled financial services sector. TCS COO N Chandrasekaran clarified: “It’s going to take three to four months to complete the acquisition. And to integrate the teams, another six months, which is a good time frame to be ready when the markets recover.”
However, market-watchers are not so optimistic. “Not only has the company increased its exposure to financial services, it has also increased its exposure to Citigroup, which was already among its top clients. Like General Electric, Citi is known to drive a hard bargain. So they are going to extract a lot of value for the money they pay,” said an analyst, terming it as move to ‘buy revenues.’
• While 11,000 employees have already joined Infosys this year, another 18,700 are expected to join before the fiscal end
• To keep these employees engaged when there are not enough projects, the company will have to deploy them on internal projects that will not earn immediate revenue
• TCS will add nearly 12,500 employees of Citigroup Global Services on acquisition
• Analysts say Citi is known to drive a hard bargain, extracting a lot of value for the money they pay (With inputs from Ranjit Shinde)