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Capgemini freezes onsite recruitment

Shivani Shinde & Priyanka Joshi in Mumbai | February 17, 2009 12:01 IST

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Paris-based IT services and consultancy firm Capgemini said its target of hiring 40,000 employees in India by the end of 2010 may not be possible, if the current slowdown continues. The company currently has a headcount of 24,000 in India.

"In India, we will still increase our headcount by 15 per cent for this year from 24 per cent last year. This is also because attrition has come down. We might have to extend it, perhaps by a year, but if recovery happens faster, we will hit these numbers," said Salil Parekh, CEO Capgemini.

He also said there are some businesses that will grow their headcount despite the overall drop in hiring. Meanwhile, the company globally has either reduced its hiring or have completely put a freeze on the numbers.

"We have put a freeze on any further hiring at our onsite centres. But we will continue to hire in India," said Luc-Francios Salvador, executive board member, Capgemini Group. The company is planning to increase its offshoring component of its business from the current 28 per cent to 40 per cent.

Capgemini has gone back on its previous expectations of modest growth in the first half of 2009, following a significant deterioration in the wider economic environment since the third quarter, said John O'Brien, senior analyst at advisory and consulting firm Ovum. Capgemini now expects to see a modest decline in the first-half sales, while maintaining an operating margin of 6.5 per cent.

Worryingly for investors, Chief Executive Paul Hermelin said in a statement: "In a climate of high uncertainty, the Group considers that it does not have enough visibility beyond the first half."

"This is hair-raising stuff, and certainly backs up what we've been expecting for some time now -- that IT service providers will find life decidedly tough from now on," said O'Brien.

In India, the company will continue to hire in the infrastructure management, BPO and consulting businesses. "Our consulting business that we launched for the domestic market will become profitable this year. While we have a small number of clients, we are getting traction now. We would be doubling our consulting headcount from the the present 600," added Parekh.

Meanwhile, unlike some of its IT peers, which have been impacted by slowdown in the US, Capgemini feels that business from the US market is good. The company is looking at a pipeline of long-term multi-million deals in 2009. Parekh said, "We see more renewal deals in 2009, than short-term project based deals.

The deals that we are eyeing will be of around 5-7 years contracts with deal sizes upward of $200 million." Capgemini expects public sector to be the fastest growing vertical in 2009, followed by utilities and pharmaceuticals. Parekh added, "We will get a few large outsourcing deals from the US and UK financial services sector too."

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