Even as it continues to cut staff and trim costs, Tata Consultancy Services, India's largest IT services exporter, feels that the decline in demand for IT outsourcing seems to have been arrested.
''We believe that decline in demand has hit a (low) plateau. But this does not mean that there would be an increase in IT offshoring,'' TCS chief financial officer S Mahalingam told reporters in Bangalore on Wednesday.
Asked about the specific area in which the fall has been arrested, Mahalingam said it was in project cancellations.
The company registered a consolidated revenue of Rs27,812 crore for fiscal 2008-09 against Rs22,619 crore the previous year, marking a registering a year-on-year growth of 23 per cent.
Mahalingam said TCS would focus on emerging economies, and the domestic market is also becoming one of its priorities. In India, TCS expects e-governance projects to pick up momentum with the new government in place.
He added that TCS expects to move more work offshore along with cost reductions to improve its operating margins, though it expects the negative headwinds like fluctuating currency movement and pricing pressure to offset any gains made.
Mahalingam said customers are asking for discounts of 5-15 per cent as their IT budgets have been reduced. At the same time, TCS is engaged in a cost-optimisation drive both in terms of employees and infrastructure, with no salary hikes this fiscal.
The decline, which was significant by September, has been arrested "but whether it will turn into a plateau period, a flat demand or take a U-shape to recovery has to be watched," he said.
"The budgets (of companies) are reasonably clearer," he said, but "it is lower than what it would have been otherwise".
Don't look for jobs here
TCS has decided to freeze hiring as well as increments, and only make an exception if the need arises. The commitments of last year are already weighing heavy on company's financial health, Mahalingam said.
TCS has so far been one of the largest employment generators in India. It offered over 24,000 jobs last year. ''Because of last year's offers there will be an additional employee cost. We will honour no more increments.''
Elaborating on the cost-cutting measures, Mahalingam said, "There will be no increase in the infrastructure of the company. We will move into SEZs (special economic zones that get massive tax concessions).
TCS aims to prune its selling, general and marketing expenses to 19 per cent of its total earnings through better cost management and efficiency measures. ''Cost management will be our focus,'' said Mahalingam.
Selling, general and administrative expenses accounted for 21 per cent of TCS' earnings of Rs600 crore in the year ended 31 March. TCS would complete the ongoing capacity expansion at various locations and add about 24,885 engineers recruited from campuses last year, Mahalingam said. For IT service companies, SG&A forms the second largest chunk of expenses after wages.