Indian cos should recalibrate their IT budgets

Written by Rupsa Ray | Rachana Khanzode | Mumbai | Updated: Mar 5 2009, 05:57am hrs
Indian companies should draw up their IT budgets keeping in mind the worst-case GDP scenario, said Gartner. According to Ken McGee, vice president and research analyst at Gartner and a member of the emerging trends and technologies group, companies in India should decrease their IT spends by 20% compared to a year ago, in a bid to weather the slowdown.

Gartner said that globally, the deepest cut in the financial year 2009 would come to the hardware segment, which will show a negative growth of 4.8% at $381 billion. Software spends are expected to reduce 6.6% at $244 billion and services will see a marginal growth of 0.9% at $827 billion. Telecom will see a marginal growth of 3.6% at $2052 billion.

Gartner predicts that globally, IT spending in 2009 will be around $3,505 billion, at a flat growth rate of 2%. Indias GDP growth is predicted to be 5.1%, but companies should adopt various ways to cut their IT budgets at this point in time. Companies should consolidate their contracts and bring them to a single vendor with a single termination time line, commented McGee.

Clients should also look at zero-based budgeting as one of the ways for cost cutting for all their existing and proposed IT expenses. Else, it is possible that clients without a proper approach to new 2009 projects might exceed the years guideline, he added.

This would largely mean that clients should start budgeting from scratch and revaluate every expense for existing as well as new projects. McGee also said that clients should look at competitive bidding rather than renegotiating with vendors on existing contracts for software and network services. This is largely because price, terms and conditions in the contracts could be based on competitive bidding rather than just renegotiated price.

McGee said that Indian companies should adapt external auditing in a bid to make sure that IT budgets are spent only for the designated purpose. Its a challenge for IT vendors; companies are looking at services that could bring cost savings in this financial year and not in the years going ahead.

This, according to McGee, could act as a hurdle for the first time off-shoring clients who would then require large sums of money to shift their base to outsourcing.

Hexaware creates virtual bench

Hexaware Technologies has created a virtual bench of 350 non-billable employees.

The company plans to retain these employees in the organisation and give them time off to improve skills and get re-trained in skills which are in demand.

Hexaware also plans to introduce a salary reduction ranging 2-10% for employees above certain levels across the organization, effective April 2009.

The salaries of employees at the entry level to those with three years of offshore experience will not be impacted, while senior-most employees will be subject to a higher percentage cut. As a result, salaries of 40% of total employees will be unaffected.