At TCS, Mahalingam acknowledges that growing margin pressure. “A big part of the game will be about efficiency,” he says. “It’s vital to work out the optimum utilization rate for the people in your organization so that you have the maximum number working as a billable resource without ignoring the need to train staff and build for the future.” He says his target is to have 78 percent of all staff working on billable assignments at any one time.
Just as important, adds Mahalingam, is the need to drive out cost and continually improve TCS’s project skills and internal processes. To that end, of the 22 percent of staff who are not working for clients, a good number are employed building software tools that TCS uses internally to operate faster and more effectively.
Equally, Mahalingam oversees a program of activity-based costing that examines every project TCS undertakes to see where money is spent and where it could be saved.
Ultimately, increasing margin pressure creates something of a paradox for the CFOs at these Indian firms, argues McKinsey’s Sinha. “There is a weight of expectation around existing margins from investors,” he says. “And yet it will be difficult for the Indian vendors to make the necessary investments to survive without diluting those margins.” As such, with CFOs typically managing not only the investment-appraisal process but also merger-and-acquisition work and investor relations, the next few years will be tougher than any yet experienced.
Justin Wood is managing editor of CFO Asia, based in Singapore.
How West and East stack up in terms of revenue.
|Western Firms (in US$ millions)|
|IBM Global Services||$42,600|
|Cap Gemini Ernst & Young||7,100|
|Indian Firms (in US$ millions)|
|Tata Consultancy Services||$1,350*|
|Satyam Computer Services||566|
|Patni Computer Services||251|
|WNS Global Services||$85|
|All figures are for the latest full financial year. Figures for IBM, Hewlett-Packard, Infosys, and Wipro include only the IT-services divisions of those companies. *CFO estimate
Sources: Company reports