With the COVID-19 pandemic adversely impacting the US and the European economies, Indian IT companies are staring at an uncertain future.
In the current, unpredictable scenario, many IT companies may have to put on hold or delay their ongoing and future projects. If an IT employee remains on bench for more than two to three months without any work or new project, they eventually become a liability for a company and may be asked to leave. An IT bench comprises of those employees that are left with no active project or have not been assigned any new project or are in between projects.
Indian IT companies have hundreds of clients from different segments. Clients that are from the services sector, travel and tourism, retail and manufacturing that have suffered immensely may delay their future IT projects or put them on hold. Even clients from the BFSI (banking, financial services and insurance) and the healthcare segment may defer or cancel their projects. Clients may even defer their existing projects by two to three months and restart them only when there is clarity about their business prospects.
“If a project is deferred or postponed, then the employee working on the project will become non-billable and may be without work till the time the project revives or they are assigned a new project by their company. If there are no new projects for such employees and they cannot be shifted to a new project, for a long time they will be left with no work. This may lead to involuntary attrition.
Then there are research and development projects that may not be an immediate priority for a client. Such kind of projects stand to get cancelled or deferred for a very long time. With many retail firms in the US filing for bankruptcy, their projects will be canceled as they will be left with no money to carry on their IT projects further. There are many projects that require on site and field work. These projects will get deferred and the IT company employees working on them will land on the bench,” said Amit Chandra, assistant vice-president at HDFC Securities.
Chandra further said those IT companies that have clients from the healthcare and BFSI segment may not be impacted immediately as the clients from these segments will carry on their operational long term projects, but those IT companies that are heavily depended on field projects, especially from retail, manufacturing and travel and tourism sector, will suffer and eventually will be forced to move their employees on the bench. “In order to retain their people, many IT companies may stop sub-contracting work in order to utilise their employees on the bench fully. Almost all the IT companies have not given their future outlook as they themselves are not sure of the uncertain future and how their clients will behave,” he added.
Some experts feel that sacking of IT employees may start from June when clients of Indian IT companies have more clarity about their future business road map. “Since a large number of IT company customers have suffered in the US and Europe, they may only be interested in current essential and operational IT projects. Since they are running with almost zero revenues, the clients may slow down their IT spending. Many may not have got the actual scenario till now and will gauge the impact only in the next month or so. Post that, they will all stop their discretionary IT spending. All this will severely impact Indian IT companies and they will be forced to cut flab in the form of employees as their people will be left with no work or projects,” B.S. Murthy, CEO of Bengaluru-based LeadershipCapital Consulting told THE WEEK.
Experts feel that new hiring scenario will also take a hit as the number of projects may slow down in the coming quarters. Many IT companies will do with their existing workforce or may not require new people at all. “Given the lockdown and uncertainty in the US, Europe and all other major markets in the world, IT spend would be halted for a few months. Thus, IT service providers would try to optimise their costs by benching, optimising the benches or retraining them,” said Aditya Narayan Mishra, director and CEO of CIEL HR Services.
Some experts feel that those employees who fear that they might be pushed to the bench may also try to re-skill themselves or their companies will help them do so that they can be easily transferred from one project to another and avoid being without work for a longer duration. “In the current scenario, project pace is expected to be slow. Benching may be a temporary measure that companies will adopt to tide over the challenging time. Organisation-led upskilling can be an effective measure to keep employees engaged and motivated as also prepare them for future projects. Professionals can also use this time as an opportunity to upskill themselves,” said Saundarya Rajesh, founder-president of Avtar Group.
