IT firms raise ratio of juniors in staff

In their bid to offer lower-cost solutions to clients and protect their margins, information technology (IT) companies are broadening the bottom of their employee pyramid by keeping the number of junior staff high and shrinking the layers of seniors and experts.

By doing so, the companies are able to reduce the total cost ownership (TCO) of a project for the clients as the difference in billing rates of an onsite fresher and a senior or an expert can be anywhere between Rs 1,000 ($20) per hour and Rs 2,000 ($40) per hour.

For offshore project, billing rates of junior staff and senior/expert differ by Rs 750 ($15) per hour and Rs 1500 ($30) per hour.
Confirming the tweaking in the staff mix, Pratik Kumar, corporate vice-president (human resource) Wipro Technologies, said fewer managers were now having a wider space of control.

By this, Wipro’s HR chief implies that more engineers now work under a single manager than before. “Ya (we are widening the base of the staff pyramid), to the extent it is necessary,” he said.

Such a squeeze at the manager level is also happening at Bangalore-based MindTree Ltd, which will not be hiring any managers through 2009.

The Ashok Soota-owned company, which recently overhauled its organisational structure, did not go for any campus hiring at any business school this year.

“Since we have decided not to lay off any staff, we have increased our utilisation of bench and have not hired any managers from MBA institutes. MindTree will not be hiring any managers throughout 2009,” said Puneet Jetli, general manager (global people function) MindTree.

The second-largest software firm —Infosys Technologies — has also shrunk the top of its employee pyramid by making 75 senior positions (band D and above) redundant.

However, a senior executive of Infosys said the employee mix of the company had not changed drastically. “The ratio has always been 1:2:5, which means one senior manager to two mid-level managers to five fresher (less than two years experience). We have frozen lateral hiring and are focusing more on training so that deployment on project is faster,” he said.

The stretching of bottom layer of the pyramid would typically mean that the staff-mix of a company will shift from a 60:30:10 ratio of juniors, seniors and experts to 85:10:5.

Analysts Nimish Joshi and Bhavtosh Vajpayee of CLSA, in their report brought out on Thursday, said this is ideal staff model that tech firms have been chasing since 2003-04.

The current slowdown has now given them the opportunity to tinker with their employee mix.

“The post FY03-04 period has been characterised by disproportionate hiring of fresher engineers. While historically, many clients have been resistant to this model, the current difficult situation is the Indian tech (companies) an opportunity to pitch solutions with a greater proportion of younger manpower,” the CLSA report said.

So, how would change is staff-mix impact a software companies business model? Not by much, says an analyst with Motilal Oswal Securities. “At present, Infosys has a fresher-experienced professional ratio of about 70:30 while the ratio for the other top firms are 55:45. For Infosys, this might increase to 75:25. The focus on freshers would be to reduce cost. But, even with large experienced population, there is scope to cut costs by pruning the variable pay that comprises 20% of their salary. So, experienced people would still be there to focus on low volume but high margin projects,” he said.

Another analyst said the one of the hazards of having more juniors would be that it would hamper quicker deployment on projects, which could adversely affect project execution.