We are in midst of a huge Financial Crisis, that's clear. And its also clear that the impact is not going to be limited to financial sector, the effect is now being slowly but surely felt on industries that are important to the real economy. Even though we, in India, are not part of the core crisis that started in India we still are greatly affected - markets are being hammered, foreign money is being pulled out of the country, promised investments aren't coming, companies depending on exports are closing down and people losing jobs.
IT sector, which is the horsepower that drove India's growth in 90's and which is still the foreign currency earner, is not left untouched. All top Indian IT companies have a decent portion of their revenues from the US Top Financial Institutions. There is a huge concern that these companies will not be able to deliver the same results in the coming quarters as the spending from affected institutions will be cut down and the projects will be shelved. There is also an opposite point of view that thinks US problems will translate into more revenues since US companies will start pushing more work to India.
We have to wait and see which view comes true in the near future. But, right now, I could see the impact. Its not as bad as the technology bubble but its there. No salary hikes, worse some companies cut the salaries, employee weeding in the name of performance, Satyam used wrong claims that were as old as 1 year to lay down a few, and now Infosys have come up with a policy where the employees can take sabbatical from their work to get involved in philonthropic activities.
I cannot comment on their real intentions. I see it as very innovative way of cutting down costs without actually looking like you are in trouble and also earning the good name in the society for its philonthropic inclience. Ofcourse they can easily use it as a tool to increase efficiency by making some of the non-performers take it. So they are not officially laid off, they can still be happy that they get 50% of their salaries.
But this also raises the question how effective these guys are going to be when they come back after an year - will they be refreshed and raring to go or will they be out of touch and find it difficult to get going? And also what if the conditions are still bad? Can Infosys just take them and put them on bench? And will they really keep on their promise of taking them back?
I see that it can be effective tool to cut costs in the near term by retaining the guys for half of the costs and having the option of getting them as soon as situation improves. You dont have to spend time and money to recruit new resources and train them on Infosys way.
Infy, this is really a smart way of doing things!
