IT firms to reduce subcontractors to control costs
Over the past few weeks, the COVID-19 pandemic has emerged as a significant and global challenge creating worldwide disruption. In order to combat this crisis and maintain the health of businesses, Indian IT Companies are planning partial self satiation by reducing their dependency on sub contractors. Believably, this will aid them in cost curtailing, since it becomes difficult to bear fall in businesses due to Covid -19 pandemic. According to Mr Debashis Chatterjee, CEO of Mindtree Ltd, which is an Indian multinational IT and Outsourcing Co., subcontracting costs shall fall in the coming months. TCS Wipro and Infosys agrees to the same.
Recently Mr. Chatterjee mentioned that in the coming quarters, the firm based in Bengaluru will continue reducing their subcontracting costs. Research says subcontracting alone makes up around 10-15% of the total employee cost. This was not the scenario few years back. Sub contracting expenses hiked in recent years because IT companies wanted new age technically skilled team. They did not bother their in house talent for the same. According to data, in the last fiscal year, TCS paid subcontracting cost that comprised of 13% of total employee cost. Similarly Wipro, Infosys and Mindtree shelled out around 22%, 12% and 11% respectively. Total employee cost is sum total of internal employees costs and subcontracting costs.
What are IT companies like TCS, Wipro, Infosys, Mindtree planning then?
It seems Covid-19 urges IT companies to get self sufficient and get their staff skilled. Milind Lakkad, Global Head Human Resources at TCS told media that they will try and lower their dependency on contractors. This step is taken to control cost. For meeting this goal, they look forward to build talent within the organization. They will go for hiring in a limited manner in hunt of specific skills. On similar lines, Wipro’s Chief Head, Human Resources Saurab Govil informs that they are screening the entire supply chain of employees, including hiring and subcontractors.
Narrating media on how huge chunk their billable are the sub contractors bills, he mentions they stand around 10-11%. The company is planning to replace them with their existing workforce. Infosys CFO Nilanjan Roy, reconfirms that according to him subcontracting will pave way towards cost optimization. Further adding he says their strategic cost optimization in automation, pyramid rationalization and also sub contracting shall not terminate and will continue. He believes the company’s strong clientele relationships and talented engine shall together enable them face this economic turbulence.
What Xpheno has to say?
Xpheno, a Specialist Staffing Solutions Company which is into offering IT Staffing, Engineering Services, Sales Staffing and Direct Hire says, IT companies are resorting to various ways to curtail their cost, by either planning to reduce the number of contractors, or expecting rate cuts from the sub contractors. While other companies are asking sub contractors to provide deferred payment options, mentions Kamal Karanth, co-founder of Xpheno.
