The Impact of falling dollar and the rising
rupee on Indian IT services providers

The objective of this article is to assess the impact of the US economy slowdown (the falling Dollar and the rising Rupee) on IT services companies in India with a larger focus on the job market scenario. The article also endeavors to identify ways in which customer and service provider expectations can be aligned to sail smoothly through these rough weathers. Part-1 of this article deals with the common trends we are seeing or the ones we will see and the part-2 will talk about the alignment strategies.

Not long ago the demand for resources in the Indian IT industry was such that each engineer walking into a company had at least three offers in hand with three different exorbitant salaries. Thanks to the falling dollar and rising rupee companies are now looking at re defining their employment strategies.

The fate of the Indian IT industry has been in constant debate over the last few months. Many believed the appreciating rupee to be a passing phase. But, the wait seems to be getting longer and longer and it looks like the falling dollar and the rising Rupee are here to stay for some time.

A large part of the revenues generated in this industry are spent on wages. A fall in revenues means the need for correction in salaries which is considered by many as a boon to services companies who have been paying irrational salaries to retain employees. This downward trend in the US economy will lead to the stabilization and standardization of salaries in Indian IT market.

It will not be a candidate driven market anymore.

Salary stabilization in the industry will encourage employees to retain their positions and not shuffle or job hop for a quick raise. Companies will look at realigning their HR strategies focusing on loyalists rather than seeking job hoppers/ replacements.

Increasing efficiencies

Unearthing previously ignored inefficiencies within the system the market downturn has urged companies to increase operational efficiencies and productivity. The importance of processes has never before been so evident. This will in turn lead to re organization of salary structures with more companies looking at increase in variable pay options where the salary structure is directly related to productivity.

Every company might react differently to this approach to operational efficiencies. While rational says cut down on inefficiencies, some companies have gone ahead and started working on Saturdays or extra hours on weekdays.

Fat reduction or right sizing

The ’Dot com bust’ flashes in our minds as soon as we hear the words fat reduction, right-sizing etc… Speaking about increasing efficiencies services companies will face a dilemma on what stand to take when the question of buffering/benching resources arises. We use them as attrition mitigation factor and to provide continuity to the project. Now, are they contributing to reduced utilization rates in a company? Will the customer agree to a zero buffer team structure?

All said and done, let us not forget that some of the largest pay masters in the Indian IT market are the captives and they are still doing their bit to attract and retain resources that are available from the same pool.

Demand for versatile resources

There will be an increased demand for versatile resources who can learn and un learn technologies / domains and markets. It is going to be simpler for a company to retrain and reuse an employee rather than recruit a new candidate from the market.

To conclude, the real solution is not in increasing the billing rate or cutting fat or reducing the business. The solution is in and always has been in working together as partners. The real solution is in alignment. The customer and the service provider cannot afford to look at this situation from two different angles as two different issues with two different solutions.

In our next article let us look at the things that will truly align the customer and the service provider which will help them navigate through the slowdown. We will look into how the alignment should happen at each key area, such as business, human resources, finance, operations, technology.

Please do share your experiences and feedback with us (marketing@aztecsoft.com). We will reply to all comments, and are eager to benefit by your experience.