IT companies to go non-linear manpower-revenue growth
In a significant shift from traditional business model, IT companies, both big and small, are looking at de-linking manpower growth from revenue growth. Companies are targeting higher revenue per employee rather than simply adding more manpower with the same productivity. This process results in more innovation, higher productivity and better use of resources in the medium term. It may not reduce the employee intake in near term but it has overall effect of reducing the new employment opportunities in the IT sector in the medium to long term.
The $4.3 billion TCS, with a head count of 89,419, does not intend to become, say, a 5,00,000 people company. Even Infosys is looking at business models that bring in higher per capita revenue and de-link revenue from manpower growth. This is more important as these companies earn substantial revenue in dollars and there is a likelyhood of appreciation of Rupee against Dollar in the medium to long term, bringing pressure on the gross margins.
At present, the revenue per employee in the domestic industry is much lower than what global players are able to extract: it ranges from Rs. 25 lakh to Rs. 40 lakh. On the other hand, for global companies, the revenue ranges from Rs. 70 lakh to Rs. 130 lakh.
To change the linear relationship betweeen manpower and revenue, the companies have to move up in the value chain. In TCS, for instance, till a few years ago, almost 90% of the the revenues came from the application space. This has now come down to 50-55% as the company has scaled up new service lines and provides end-to-end solutions to the clients. High growth services like infrastructure management, consulting and BPO now account for 18% of TCS revenues comapred to 10% in 2005-06.
Some of the small and medium sized companies aiming at reducing manpower dependence by using productivity tools and automation. Pune-based Zensar Technologies has built a model known as "solution blueprint" (SBP) to reduce dependence on manpower and scale down maintainance costs. SBP is a collection of work flows, design models and protocols that allows automation of the software engineering process.
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