Time to get leaner
On the operational front, the companies will try to protect their margins by condensing their hiring plans and increasing the utilisation rate (currently ranging between 70-75 per cent), hiring fewer laterals (individuals with work experience), moderating the growth in wages in the range of 8-12 per cent and keeping a check on their selling, general and administration (SG&A) expenses.
While the attrition rate across the industry stands at 13 per cent, analysts feel that the same could reduce by a couple of percentage points at least and aid the utilisation rate. Viju George points out that on-the-ground monitoring activity suggests that hiring has gone down by at least 20 per cent y-o-y. Firms have become very cautious and there are a number of instances where they have postponed the joining dates of new recruits.
From a strategic point of view, companies could move towards a more integrated business model catering to the entire spectrum of horizontals and verticals. More thrust is expected to be laid on the nearshoring (setting up offices nearer to the client), to tap conservative markets of Europe and Japan, where the penetration of Indian IT companies has been relatively lower.
Companies are likely to consolidate by gaining niche skills, scale and clientele and moving up the value chain from their bread-and-butter application development and maintenance (about 50-60 per cent of revenues) to high growth, high margin areas such as consulting, infrastructure management services, packaged implementation and engineering.
Image: An Indian bank employee counts rupee currency notes in Mumbai. | Photograph: Indranil Mukherjee/AFP/Getty Images
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