‘Infy is not in Mumbai because of poor quality of life’

Mohandas Pai, a board member and director, finance-HR, of Infosys Technologies, believes human resource management is as an art — the art of the impossible. At the sidelines of an HR conference in Mumbai, Pai shared with DNA Amit Tripathi his company’s approach to cost cutting and cash utilisation as good times return. Excerpts from an interview:

For next fiscal, you said recruitment won’t be as much as last year. Would that mean we see an improvement in utilisation rates as good times return?
Recruitments would be better than this year, but may not be as good as FY08-09. The industry will still see 2-3 lakh people being hired. Once the good times return, we would maintain the utilisation at 78-79% level.

Would you continue with the austerity measures?
On the cost-reduction side, we have come to the next level. So I think we are quite okay.
But COO Shibulal recently said cost cutting measures would continue… Yeah, he said many of the things (cost-cutting measures) haven’t been reversed as they have been very good because people have accepted it. For example, our video conferencing has gone up from 150 per day to 1,000  a day. Travel has come down 35%. We are not going to go back to 35% more travel because a large part of travel is a waste of time.

What are the other cost cutting measures you want to continue with?
We weeded out non-performers, 3.5% of our employees, as the last part of our cost-cutting measure. We said there is zero tolerance for non-performers. We cut some travel, some discretionary spend, we optimised, we went for sustainability drive and ultimately, all that added up to just 2% of revenues. That’s not great. Cost-cutting is more important for the mindset of people. The mindset is to drive productivity, focus on results rather than focus on anything else.

Infosys is stashing big cash. Is there a big acquisition lurking around?
Look, 75% of the acquisitions fail. So the cash in the balance sheet is for risk management, to make sure that we have enough cash to pay everyone their salaries for one year even if we do not earn a single rupee in revenue. We have said it for many years. The cash is not for blowing up in buying companies. It is to ride over the bad times.  Compare it with a manufacturing firm. It would have raw materials stock, blah, blah, blah. We are in the people business. We have no raw material. Ours is 85% value-added business. And theirs, maybe 40%. Indian Oil, for instance, maybe 20%. So we got to pay people by the month-end. If somebody does not pay us, then we would need the money to pay salaries at the end of the month.

TCS founder F C Kohli has said IT means hardware & software, but firms aren’t really looking at hardware...
Let me tell you one thing: the days of hardware is gone, because China has commoditised it in such a way that you will not make money. See, today semiconductor manufacturing is there only in Taiwan and China. Singapore has also lost out. They are selling the companies there or I think they have already sold. There is no point in putting billions of dollars and earn peanuts. The return on investment on hardware is very poor. Also, you need to build an ecosystem for hardware. Is one company doing hardware? To do all that small, small systems, you need an ecosystem. That’s not possible now. We have missed the bus. It’s not worth it. Why put money where you have a low rate of return? Instead, put it where you get a high rate of return.

The government has been urging IT firms like Infosys to set up SEZs in places like J&K and the northeast. The policy makers were talking more from an inclusive-growth perspective. Do you really have any such plan?
No. See, we can hire anybody from any part to come and work in Bangalore. For youngsters, the first choice is Bangalore. Then it is Pune or Hyderabad. That’s what our study shows. I can go to Kolkata and hire 5,000 people every year. We need not be there. So for people like us, it does not matter where we are. We will go to places where it is comfortable, where the infrastructure is good, quality of living is good. Why are we not in Mumbai? The quality of life in Mumbai is pathetic. Look how will you get good housing? Housing is pathetic in Mumbai.

But the government talks of inclusive growth and all …
Look, we have been in Mangalore since 1994. For the first seven years, they did not give us power, we ran on generator. Then we bought a place. The next seven years they did not give us land. Now we got an SEZ. Then we have been in Bhubaneshwar since 1996. Then we are in Chandigarh since 2000. 15% of our workforce is from smaller cities. Let me tell you, 40% of people who are joining us from colleges don’t have both parents who are educated. The parents are bus drivers, conductors, live in slums, but have provided education to their children.This is social transformation. This is inclusiveness.