Layoffs not real answer to effective cost control

As businesses brace for a possible economic slowdown, they are expected to further slash unnecessary expenditure and bring down overheads to improve the bottom line. Trimmed down budgets and well-planned cost cutting initiatives can help create savings and optimise operating margins for companies that don’t have too many sources of revenue to look forward to, thanks to the global financial crunch.

Here are areas where businesses, big and small, can cut spending and create valuable cash reserves to tide over any impending crisis.

Realign goals: For example, the annual budget may need to be altered to cope with new circumstances, and expansion plans may be put on hold. Look for ways to release cash from capital. Unused/ high maintenance assets are usually the first to go in a bid to reduce operating costs and retain liquidity.

Cash requirements might also have to be carefully projected and closely monitored. Tighten conditions relating to cash and accounts receivables and negotiate for better deals with vendors and contractors.

Focus on work that counts. Fall back on your best, most dependable products and services, and aim to get more value for every penny you invest. Outsource non-essential processes if it will bring down costs and improve production and people practices to increase productivity levels and lower operating costs.

Go slow on hiring and layoffs. Going slow on hiring makes obvious sense, but layoffs are another matter altogether.

Although at first glance layoffs seem to offer a quick fix answer to cost control, the mid-term and long-term consequences of layoffs are disastrous. Look at your employees as assets, not overheads.

Train employees to improve their skills and utility ratio and acknowledge and reward deserving employees even if resources are scarce. This is the time for you to let your employees know that they make a difference.

Cut down on unnecessary costs and discretionary spending in areas like travel, entertainment, telephone calls and meetings. Tighten regulations and minimise cash advances. Institute stringent receipt requirements for all reimbursements. Offset expensive incidental benefits such as performance bonuses, high premium health benefits, stock options and legal assistance with other benefits that are easy on the pocket.

Conduct an energy audit. Even simple things like introducing energy efficient lighting, heating and cooling can make a big difference to running costs.

Ask employees for suggestions. Employees usually have a wealth of ideas, and tapping this powerful source can give the organisation some innovative and inspiring leads to keep costs under control.

Revaluate your strategy and decide on the how you are going tackle the situation. Revisit priorities and ensure that your team has a complete understanding of the contributions they are expected to deliver.

During a period of boom, companies often neglect to keep track of spiralling costs and wasteful expenditure. It may not have mattered then, but with economic challenges looming ahead, a little prudence will ensure that the organisation is able to sustain its effectiveness and profitability in the long run.

IT job losses in India can top 50,000 in Jan-June 2009

Over 50,000 IT professionals in the country may lose their jobs over the next six months as the situation in the sector is expected to worsen due to the impact of global economic meltdown on the export-driven industry, a forecast by a union of IT Enabled Services warned. ".

There would be 50,000 job losses (IT and BPO put together) over the next six months," Karthik Shekhar, general secretary of UNITES India, a politically neutral union of ITES professionals told PTI. The job loss in the IT and BPO sector in the country topped 10,000 in the September-December period, Shekar said. While employees of medium-sized companies bore the brunt of job losses in the September-December period, it's going to be their counterparts in the big and small firms who would increasingly face the axe in the coming six months, he said.

UNITES India, affiliated to the global union United Network International, suggested that the companies in trouble could resort to salary and incentive cuts without trying to "squeeze" the staff, rather than adopting the "layoff path". Employees are willing to take such cuts for 12-16 months till the demand picks up again, when such benefits should be restored to them.

Shekhar said senior officials of the industry had concurred with the figure of 10,000 job loses in September-December, stating that it accounted for "bottom five per cent of the performers". Consultations with the union's counterparts in the US and UK suggested that slowdown would continue to hit the offshore sourcing space, he said.

He said factors like continued slowdown, likely "tax application" to companies outsourcing jobs under the new US regime and tightening in regard to H1B visas were among the key reasons cited for the acceleration in issue of pink slips. PTI.

Satyam ‘deal’: what went wrong

Had the company considered only Maytas Infra, things would not have been worse

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‘Investors sought to know as to why the company did not put the matter for ratification of an emergency general meeting’.

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— Photo: K. Ramesh Babu

failed attempt: IT professionals at Satyam Computer Services in Hyderabad.

No corporate house must have been battered as much as Satyam in the recent times. The company’s announcement of acquisition of Maytas Infra and Maytas Properties turned it into a punching bag for investors, broking houses, analysts, and, of course, the media.

What actually went wrong with the Hyderabad-based IT bellwether that went to occupy the enviable position of being the fourth largest IT services provider in India? What drove the company to amalgamate its “own and very own” companies — Maytas Infra and Maytas Properties — into itself? Will the ‘misreading of the market’ by Satyam bosses trigger a leadership change, as it is being made out by analysts? Markets are abuzz with several such questions.

In spite of occasional brickbats from some quarters, the company always basked in the afterglow of numerous achievements, including the Golden Peacock Award for excellence in corporate governance. Never had Satyam’s prestige, which rode on the crest of its popularity, hit its nadir like now.

Why did Chairman Byrraju Ramalinga Raju give a thought to diversify from the IT business in the first place and enter infrastructure and real estate sectors? Consider two scenarios.

By his own admission in several interviews soon after announcing the decision of acquisition, Mr. Raju thought that the two acquisitions would pave way for an accelerated growth in additional geographies and market segments such as transportation, energy and several infrastructure sectors for the core IT business, besides de-risking IT.

In such a case, the IT major would have maintained the growth it has anticipated. And, the company expected a bullish reaction from the market and steep rise in its stock price in the hour of economic downturn.

He remained committed to his views even after the company “reversed the decision eight hours after the announcement,” as observed by Srinivas Vadlamani, Chief Financial Officer.

In the second scenario, assume that Mr. Raju considered a bailout package for the two companies headed by his offspring — Teja Raju (Maytas Infra) and Rama Raju Jr. (Maytas Properties) — Maytas Infra would have benefited by becoming a vertical of over $3 billion combined entity. For the company’s net worth would have easily fetched it contracts for huge projects and it wouldn’t have had to depend on consortia for taking up projects. Satyam proposed to take a controlling stake of 51 per cent in Maytas Infra by paying $0.3 billion.

The acquisition of the privately-held Maytas Properties, valued at $1.3 billion, would have served two purposes. (1) large-scale cash flow into the immediate and extended family of Mr. Raju that would be useful to unlock the potential of the assets held by them and (2) Maytas Infra and Maytas Properties would have complemented each other’s functions in terms of securing contracts and executing the work due to the ‘swollen balance sheet including that of Satyam’.

Had Satyam considered only Maytas Infra, things wouldn’t have been worse. On the other hand, the share price of the combined entity would have jacked up, said an insider.

But investors threw the proverbial spanner in the wheel pushing the two listed entities — Satyam Computer Services and Maytas Infra — into a spin. The promoter’s group is an interested party in the target companies. Can the two companies ever make up for the loss of credibility and market capitalisation in the near future is a “billion-dollar question” staring at them.

While investors sought to know as to why the company did not put the matter for consideration and ratification of an emergency general meeting, analysts talked about leadership change. Ambareesh Baliga, Vice-President, Karvy Broking, felt that large investors might push for a leadership change. Edelweiss in a report said: “Satyam’s proposed acquisition of Maytas Properties (unlisted) and Maytas Infra (listed) marks a new low in the conduct and integrity of corporate governance in our view notwithstanding that it has called it off later.” In fact, Mr. Baliga predicted that the P/E (market value of the share divided by earnings per share) multiple of the company would come down to four or five.

Analysts Angel Broking went to the extent of calling the deal “dubious” and that it could hurt India’s corporate governance perceptions.

Independent directors on the board, however, strongly came in support of the decision. Dean of Indian School of Business Mendu Rammohan Rao, who chaired the session as the interested parties exited the board meeting, said, the company made a presentation to the Board and expressed the facts that there was likely to be a slowdown in the growth of the IT software services industry, that in the next five years, margins would be squeezed. Business growth would shift from mature economies, where the business of software services originally thrived, to developing economies. It was therefore important for the company to diversify.

The company had been valuated by one of the “big four” global accounting firms, it was a conservative valuation. Besides, the proposal from Satyam was lesser than the valuation. It therefore made sense to go with the proposal.

The largest stakeholder, the Rajus, have 8.6 per cent (largest stakeholder group) of the 67.34 crore shares. Institutions have 61 per cent and the remaining is held by the public.

Will the share buyback instil confidence among investors is another big question. Mr. Baliga felt that the company might choose the “safest” market purchase route, instead of going in for an open offer, for the company must buy in the ‘open offer’. It is only a conjecture of time before the board of directors decides the buyback pattern on December 29.

Citigroup sells CTS to Wipro for $127 mn

Global financial services giant Citigroup Inc on Tuesday sold its 100 per cent subsidiary Citi Technology Services Ltd to Wipro for $127 million. CTS is an India-based captive provider of information technology services and solutions to Citi entities worldwide.

As part of the transaction, an all-cash deal, Bangalore-headquartered Wipro and Citi will sign a master services agreement for the delivery of technology infrastructure services and application development and maintenance services for six years.

Under the agreement, Wipro will get at least $500 million as services revenue from Citi.

Citigroup Global Technology Head Jagdish Rao, based in New York, said at a press conference that this $500 million is a 'minimum commitment' and it could grow to 'twice as much' in six or seven years.

With two centres each in Mumbai and Chennai, CTS provides IT services to Citi and its affiliates around the world.

CTS's 1,650 employees, trained in Citi processes and technologies and servicing Citi businesses in more than 32 countries, will now come under the Wipro Technologies fold, the global IT services business arm of New York Stock Exchange-listed Wipro Ltd.

CTS clocked revenue of $53 million in the calendar year 2007 and the earning is expected to go up to $80 million in 2008.

Apart from competencies in TIS, CTS has expertise in ADM for cards, capital markets and corporate banking.

Wipro officials said the transaction strengthens the Bangalore-based company's relationship with Citi.

Rao denied that the sale was triggered by turmoil in financial services, saying Citigroup would have gone ahead with the deal irrespective of the situation.

Wipro Joint CEO (IT business and member of the board) Girish S Paranjpe said Citi has played a pioneering role in leveraging technology for banking, adding Wipro is pleased that its domain expertise and infrastructure management capabilities positioned it as Citigroup's partner of choice.

"This position has further strengthened with this strategic transaction," Paranjpe said.

The transaction is expected to close by March next year.

Wipro senior vice president (finance solutions) Soumitro Ghosh said: "Citi Technology Services team's expertise in addressing the risk and compliance issues for banking industry positions us well to offer similar scale and complexity of services to other leading banks in the United States and Europe."

World Bank bars Satyam

Satyam Computer Services has been barred from business with the World Bank, a spokesman for the World Bank said on Tuesday, confirming a report by Fox News.

Fox News said in a report on its website the World Bank had banned Satyam from all World Bank-related business for a period of eight years from September. It said the ban was due to "improper benefits to bank staff" and "lack of documentation on invoices" and cited Robert Van Pulley, a top World Bank information technology official.

"The information is true," Sudip Mozumder, a spokesman for the World Bank in New Delhi, said by telephone.

A spokeswoman for Satyam said the company did not comment on individual clients. Shares in the Hyderabad-based software firm, which is also listed in New York, closed down 13.55 percent at 140.40 rupees on Tuesday in a Mumbai market that ended down 2.4 percent.

Satyam, India's fourth-biggest software services exporter, shocked the market last week with a proposed deal to buy two firms which management had a stake in.

Although it bowed to investor outrage and cancelled the plans to buy two builders just 12 hours after the deals were announced, a slew of brokerages have downgraded the stock saying it would be difficult for the firm to restore investor and client confidence.

NVIDIA brings supercomputing to the desktop

US technology firm NVIDIA rolled out high-performance "personal supercomputers" that let desktop workstations handle mind-boggling tasks once far beyond their capabilities. Computers built with innovative NVIDIA graphics processing units (GPUs) are capable of handling calculations typically relegated to expensive supercomputing "clusters", a technology breakthrough the company says could soon bring lightning speeds to the next generation of computers aimed at the consumer market. 

NVIDIA's Tesla Personal Supercomputers deliver approximately 250 times the processing power of current computer workstations for similar prices, according to the California-based company.

"This changes everything. This supercomputing power is being brought to the workstation," Tesla computing products general manager Andy Keane said.

Massachusetts Institute of Technology and other universities and research facilities are already using GPU-based personal supercomputers. "GPU-based systems enable us to run life science codes in minutes rather than the hours it took earlier," said Jack Collins of the Advanced Biomedical Computing Centre in the US state of Maryland. "This exceptional speedup has the ability to accelerate the discovery of potentially life-saving anti-cancer drugs." 

NVIDIA, founded in 1993, became renowned for GPUs that drive sophisticated computer game and video hardware.  

World's first eco-computer produced in Ireland

The world's first biodegradable computer, the iameco, has been manufactured in Dublin from bio-degradable wood panels made from waste products in the lumber and pulp industry.

During a visit to the company by Ireland's Minister for Science and Innovation, Jimmy Devins, the inventors of iameco, MicroPro Computers Ltd, said they could implant the seeds of native-tree species into the wood panels.

The minister's visit coincided with the announcement of details of a new Enterprise Ireland Green Technology Support for businesses.

"Our business is built around green technologies and using them to produce healthier, more energy-efficient and cheaper computers that have less impact on the environment," said Paul Maher, chief of MicroPro.

He added: "One advantage of iameco is that when the components are buried in landfill the wood gets wet, breaks down and new plants begin to grow from old computers."

In addition to the iameco computer, which uses one third less energy than conventional computers, the biodegradable wood can also be used to manufacture the computer monitor casing, keyboard and mouse.

Commenting on the success of iameco, Devins said: "The iameco computer story is a true example of innovation at work. Not only have MicroPro Computers developed a new, profitable product range but consumers now have the option of buying an environment friendly computer or TV."

He added: "Enterprise Ireland's GreenTech Support can help companies find ways to reduce air pollution and effluents, conserve water and save energy in the workplace as well as come up with new environmentally friendly products."

No interviews for PhD students from IITs: TCS

Tata Consultancy Services (TCS) CEO and Managing Director S Ramadorai said that the company would hire computer science PhD students who have graduated from any Indian Institute of Technology (IIT) in the country without any interviews for the next five years.

He was speaking at the Tata group CEOs panel discussion at the Pan IIT Global Conference 2008, being organised at IIT-Madras.

This would encourage students to pursue PhDs and take up research in computer science and encourage other companies to follow TCS, he said.

Meanwhile, management guru C K Prahalad, in his special address, said over the next 15 years, India can produce nearly 200 million college graduates and 500 million professionals across all professions in the country.

The country can contribute to 10 per cent of global trade and there should be at least 30 per cent of Fortune 100 companies from India.

"The country should be a laboratory of thinking and innovation" and should create at least 10 Nobel Prize winners in Science and Arts, he added.

Commenting on the global financial crisis he said it is an opportunity for India to become stronger, vital and a more vibrant economy.

Arbitron setting up technology centre

Arbitron of the U.S. is in the final stages of setting up its fully owned subsidiary, Arbitron India, in Kochi.

Arbitron is an international media and marketing research firm serving the media; radio, television, cable, online radio and out-of-home as well as advertisers and advertising agencies in the United States and Europe for the last sixty years. The Kochi centre, with an investment of over ten million dollars, is to come up at Tejomaya, L & T IT park inside Infopark. The centre will be formally inaugurated on January 5 by Steve Morris, chairman and President and CEO of Arbitron Inc.

Talking to reporters Shilen Sagunan, managing director and Vijoy Gopalakrishnan, manager (Analytics) of Arbitron said the Kochi centre would be set up as a world class facility for software engineering. It will play a key role in the development of technology and providing operational support for the implementation of Arbitron’s flagship service, Portable People Meter and other products which are being installed throughout the US and other countries.

Answering a question, they said the global meltdown has not affected companies like Arbitron, which continues to be on a growth path and is going on recruiting people. The centre would employ 280 technocrats in the beginning and is expected to double this number within a year .

Polaris Software to invest Rs.350 mn for expansion

At a time when the domestic software sector is going slow on hiring of personnel and expansion, the city-based Rs.11-billion Polaris Software Lab is taking a contrarian path.

The company has decided to construct a new 1,500-seat facility at Siruseri near here with an outlay of Rs.350 million.

"Construction activity will start next quarter. We have 10 acres there," Polaris chairman and managing director Arun Jain told IANS.

Explaining the rationale of expansion when the global financial sector is facing a meltdown, he said: "The financial sector problem is mainly concentrated in the US. There are over 175 countries in the world. It is time to build capacity to take advantage of the uptime to come soon."

According to him, the proposed centre will serve the company's retail banking and insurance clients.

"We will go for new hiring as well as redeploy some of our people at the proposed centre," Jain said.

In Chennai and its surroundings, Polaris has its retail banking, insurance and testing centres.

Polaris, which last month acquired SEEC Inc, a US-based product and component services company for insurance vertical, is likely to expand insurance operations here.

"It will take a software services company at least a decade to transform into a product company. Today, Polaris has a comprehensive suite of banking software products," Jain said.

Speaking on the US banking giant Citigroup's investment in Polaris, Jain said: "Citigroup is a strategic and not a financial investor in Polaris. Citigroup and I embarked on a joint journey and neither of us can disembark midway."

Citigroup holds 43 percent stake in Polaris through its group company Orbitech Ltd. Polaris had acquired another Citigroup company OrbiTech Solutions in 2002.

According to him, the acquisition got Polaris intellectual property rights for a suite of products and the company made further investments to build a robust range of solutions.

Govt tells RoC to give report on Satyam deal in 3 weeks

The government has asked Register of Companies to look into the Satyam-Maytas deal and submit the report within three weeks.

"We have asked the RoC to look into the matter, get the information from the company and inform us within three weeks as to what is the factual story. Only when we have the information can the government do anything," Union Corporate Affairs Minister Prem Chand Gupta said in New Delhi pm Saturday.

When asked if there is a prima facie case for probe, he said, "let us not try to influence the whole process. Let us wait for few days and get the information. . . we can't say anything unless we get the report."

The incident, he said, has brought bad name to the corporate sector, not only in India but throughout the world. "I won't say whether there was any irregularity or not unless we get the report, but unfortunately this has brought a bad name to the corporate sector not only in India but world over . . . very unfortunate," Gupta said.

He said though the government has always been of the opinion that corporates should be given a free hand in dealing with their daily affairs but "certainly we want that they should govern themselves with accountability and that they should keep the larger interest of society and stakeholders".

Satyam Computer services [Get Quote], India's fourth largest software company, had decided to buy two firms promoted by Satyam chief R Raju's two sons -- Maytas Properties and Maytas Infra -- for %1.6 billion (about Rs 8,000 crore), but called off the deal within few hours following investors' wrath.