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The unrelenting march of the rupee against Uncle Sams currency is giving sleepless nights to tech and BPO captains. In the last two quarters, this has eaten into their profit margins. They are apprehensive that the rupee appreciation would have a multifold ramification for IT ITES industry, especially once the tax holiday is over in 2009. Therefore, its critical for enterprises to maintain and grow their margins through innovative measures, intelligent hedging mechanisms and smart deployment of manpower.
The industry perception is that theres a 2030 basis points change in profitability for every single percent rise in the domestic currency. This would have a far severe impact on the BPO sector than large IT companies which get a natural hedge as their work can be done onsite as well.
Kiran Karnik, president, Nasscom says, Its a difficult time for Indian outsourcers as they are already struggling with rising staff salaries.
Subroto Bagchi, COO, MindTree Consulting, feels the way the rupeeversusdollar issue has been allowed to continue reflects myopic thinking. People in the government have gone on record saying the IT industry can take the rupee impact and hence, the governments measures are justified. What policymakers have failed to understand is that larger companies with their huge reserves can take the impact. But remember, they only represent the past, while the future lies in startup, small to midsize companies. However, Atul Jalan, CEO, Manthan Systems, a Bangalorebased software firm, says the rupee impact, in the longterm, may drive the industry towards a good mix of higher value business.
Raman Roy, founder, Quatrro BPO Solutions, says, Its indeed a challenging period for BPOs as 100 percent of their business is done offshore and all their expenses are met in rupees, when IT firms get an onshore share of 3040 percent.
According to Bharathwaj, chief marketing officer, 24.7Customer, BPO companies too are looking at ways of hedging by diversifying across markets like Canada, UK and Australia, changing delivery mix to countries where the currency appreciation has not been as steep and looking at medium and longterm hedges to manage future US dollar declines. This may offset the impact, he added.
In fact, Roy suggests that this scenario should be a wakeup call to adopt the best practices in terms of efficiency, productivity and talent utilisation and keeping costs under control to build a solid bottomline. The fact of the matter is that whether the going is good or bad, outsourcing will boom and it will be business as usual for India.
Industry observers also say the rupee scenario might bring annual salary increments under check. Says Mohan Sethuram, a Bangalore techie, Were aware that the present scenario calls for a jugglery in terms of costcutting, productivity optimisation and increased talent utilisation. Its certain that tech firms are not going to grow as much as they did in the past, but this may not have any immediate impact on salaries, etc. Thats because there is a lot of competition as far as pricing, winning accounts, retaining and attracting talent goes.
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