global ress

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Chapter-1 Introduction

1.1 What is a recession?

A recession is a decline in a country's gross domestic product

(GDP) growth for two or more consecutive quarters of a year. A recession

is also preceded by several quarters of slowing down.

Recession means a slow down or slump or temporary collapse of a

business activity.

1.2 Impact of global recession on India

RECESSION is the result of reduction in the demand of products in the

global market. Recession can also be associated with falling prices known

as deflation due to lack of demand of products. Again, it could be the result

of inflation or a combination of increasing prices and stagnant economic

growth in the west.

Recession in the West, especially the United States, is a very badnews for our country. Our companies in India have most outsourcing deals

from the US. There is a decline in the employment market due to the

recession in the West. There has been a significant drop in the new hiring

which is a cause of great concern for us. Some companies have laid off

their employees and there have been cut in promotions, compensation and

perks of the employees. Companies in the private sector and government

sector are hesitant to take up new projects. And they are working on

existing projects only. Projections indicate that up to one crore persons

could lose their jobs in the correct fiscal ending March. The real estate has

also a problem of tight liquidity situations, where the developers are finding

it hard to raise finances.

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IT industries, financial sectors, real estate owners, car industry,

investment banking and other industries as well are confronting heavy loss

due to the fall down of global economy.

1.3 What causes it?

Currency crisis

Energy crisis

War

Under consumption

Overproduction

Financial crisis

Price of Fuels

1.4 How it effects?

Bankruptcies

Credit crunches

Deflation (or disinflation)

Foreclosures

Unemployment

1.5 Indicators of recession

People buying less stuff

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Decrease in factory production

Growing unemployment

Slump in personal income

An unhealthy stock market

1.6 History of recession

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RecessionName

RecessionYear

TimeTaken

Cause & Impact

GreatDepression

19291939 10 years Stock markets crashed worldwide, and abanking collapse took place in the UnitedStates. This sparked a global downturn,including a second, more minor

recession in the United States, theRecession of 1937.1937 OilRecession

19731975 2 years A quadrupling of oil prices by OPECcoupled with high governmentspendingdue to the Vietnam War lead tostagflation in the United States

Early1980sRecession

19801982 2 years The Iranian Revolution sharplyincreasedthe price of oil around the world in

1979,causing the 1979 energy crisis. Thiswascaused by the new regime in powerinIran, which exported oil atinconsistentintervals and at a lower volume,forcingprices to go up. Tight monetarypolicy inthe United States to control inflationleadto another recession. The changeswere made largely because ofinflation that was carried over fromthe previous decade due to the1973 oil crisis and the1979 energy crisis.

Early1990sRecession

19901991 1 year Industrial production andmanufacturing trade salesdecreased in early 1991.

Early2000sRecession

20012003 2 years The collapse of the dot-com bubble,the September 11th attacks, andaccountingscandals contributed to a relativelymild contraction in the NorthAmericaneconomy.

Early2008sRecession

2008-so on Continuing

Let see what can be the impact ofthe 2008 recession of US market onWorld.

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Chapter - 2 Review of literature

2.1 Articles review

1. In a discussion organized by the Karnataka Government on the Impact

of global economic meltdown Kris Gopalakrishnan, CEO of Infosys

said:-In the backdrop of the global economic meltdown, fresh graduates

might find it difficult to get rewarding jobs for the next two years. According

to him, the young generation would not find the information technology

sector very attractive in the next two years, and asked the fresh graduates

to pursue studies. Fresh graduates will be affected in the next two years.

They may not find the sector very attractive. He added that no employeewould be retrenched. There was still scope for expansion in the IT sector

in, provided the government improved the Investment climate in the State.

2. Karnataka IT Principal Secretary Ashok Kumar Manoli said that Tata

Consultancy Service also has promised not to retrench any of its

employees in the wake of the financial crisis. He said the impact of the

global meltdown on the IT sector in the state is not alarming.

3.According to the data available with the Software Technology Parks of

India (STPI), Karnataka has made an IT export for Rs 15,000 crore during

the first half of 2008. The slowdown will have certain impact on the IT/BPO

sectors and some cost-cutting measures would be needed. Now they

started the discussion on the strength and weakness of the industry and

ways to redesign its working.

4. According to the Institute for Labor Education and Research The

local economy is starting to get its share of the International Labor

Organization's projected 20 million global jobs loss by next year.

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According to Eiler Executive Director Paul "Since the country's economy

is export dependent, local jobs are starting to be hurt by the financial crisis.

The workers ultimately bear the brunt of the crisis through job loss and

employment of various flexible measures affecting wages and workconditions. Jobs in the export processing zones will likely to be hit with the

expected slump in global consumption due to the financial meltdown.

5. On (11 February 2009) Finance Minister presented his views

The current global financial crisis and the local economic environment

is forcing companies to retrench staff. Retrenchment is not an event,

but a process. It may play itself out over a long period of time, andaffects everybody in the company. Those who have been retrenched are

possibly the worst affected, but individuals who are doing the retrenching

and those left behind are unlikely to escape unscathed.

6. BNET piece points to research that layoffs often dont improve

companies financial performance essentially the reason they are done in

the first place and to a 2003 study by the Institute of BehavioralScience that found that people who had seen co-workers laid off reported

poorer mental and physical health than workers who had not been

exposed to layoffs at all. Reporting even worse health and attitudes were

layoff survivors who were shifted to different positions or departments

within the company.

7. From the companys data on sick leave, he also found that managers

and other higher-skilled workers took more sick leave, he suspects to look

for other jobs. Less-skilled workers, meanwhile, took fewer sick leaves and

absenteeism at the company declined as workers hunkered down, trying to

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hang on to their jobs. And that was in a job market much more favorable

than that of today, he points out.

8. Deborah Dunn, a stress-management counselor who worked with

survivors of the shootings at Virginia Tech and Hurricane Katrina, says

dealing with the recession and ongoing fears of being laid off can be as

difficult as dealing with a disaster. Its a killer, she says. These people

have lost good friends, vast quantities of institutional knowledge, pay

raises, benefits plus, theyre being asked to add other peoples work to

their own load. And theyre expected to be upbeat about it. Theres that

low-level anxiety, vulnerability to colds and flu, aches and pains, sleeping

difficulties. When youre anxious, waiting for that next shoe to drop, your

body stays in a kind of fight-or-flight mode, Dunn said. your body is

overproducing adrenaline, cortisol, and the hormones you need to sustain

yourself during a crisis. ... Those substances your body is producing are

very toxic.

9. A Sudarsan, vice-president (sales and marketing), Expertus HR

added that "In general, no job will be safe. Even those who are doing well

can't be sure of retaining their jobs in the sectors hit by the downturn.

There will be either no increments or marginal increments. Variable pay

may rise, but not fixed pay,"

10. An article throw a much clear light on the current Indian IT situation.

Just a month ago, Satyam Computers decided to lay off as much as 4500

software engineers in wake of restructuring and cutting down the IT costs

(lay-offs were India oriented).

Moving further, HP, the largest PC maker, to go well with its EDS

integration (which it acquired few months back) announced to lay off

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substantial jobs numbering to around 26,000. Maximum of these pink slips

are decided to get distributed in Indian centers.

Further, Indian biggies like TCS, Infosys, and Wipro which were

considered immune to this retrenchment have deferred promotions, cut off

hiring fresher and even have shown pink slips to many who are one or two

year experienced.

11. A domestic brokerage firm Motilal Oswal said in its India strategy

report that "Indian vendors have witnessed several project cancellations

during the third and fourth quarter of the fiscal year 2009. The magnitude

of project cancellations is different for different vendors. Along with project

cancellations, delays in client decision making will cast a toll on 4Q FY-09

volumes". Major information technology firms are expected to post a

decline in revenue growth in the fourth quarter of 2008-09, primarily on

account of project cancellations.

"We expect IT companies to report quarter-on-quarter dollar revenue

declines owing to stressed volumes and declining realizations. This is the

second consecutive quarter where the sector will see dollar revenue

downgrowth," it said.

According to Motilal Oswal following substantial across-the-board price

cuts, IT companies are hopeful of restricting price cuts to five per cent in

the March quarter. Besides, focus on off-shoring would improve the impact

from declining realizations. "We expect growth to start picking up fromsecond half of FY-10, as clients begin to adopt off-shoring to cut costs. As

the freeze in technology spending begins to lift, we believe large players

would start booking volume growth".

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12. A brokerage firm Sharekhan said in its IT earnings preview that

The rupee has depreciated 4.69 per cent against the US dollar during the

March quarter, while on a year-on-year basis it has depreciated over 27

per cent. Hence, the top-line growth even in rupee terms is expected toremain flat to marginally negative on an organic basis during the quarter".

Meanwhile, the appreciation of the dollar against other international

currencies (Euro and pound sterling) would impact the dollar term

revenues of the front-line IT firms. This leads to have a negative impact of

2-3 per cent on the dollar term revenue growth rate as the IT Companys

bill around 25-30 per cent of their revenues in the pound sterling, the euro

and Australian dollar," it added.

IT major Infosys would kick-start the quarterly earnings season from April

15 followed by other IT majors -- Wipro, HCL Technologies and Tata

Consultancy Services. "Technology stocks are likely to under perform the

markets over the next few quarters," Sharekhan said.

The Sharekhan report stated that in terms of earnings, Infosys is likely to

meet the lower end of its dollar guidance. Besides, HCL Technologies is

likely to report a revenue growth on the back of acquisition of British

consultancy firm Axon, which would cast its toll on the operating profit

margin of HCL.

The October-December results of the leading Indian software firms appear

better than they actually are. All the big three firms -- TCS , Infosys and

Wipro -- have posted on a consolidated basis fairly healthy top line growth,

in the 24-35 per cent range. They have also more or less maintained their

net margins, in terms of their own past trends.

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13. Arun Kejriwal of Kejriwal Research and Investment Servicessaid

that "Forward earnings for most companies are not expected to be good.

The earnings for the entire IT sector are expected to be bad and the

Infosys results are likely to give a new direction to the market," During theJanuary-March period, Infosys scrip has gained 15.38 per cent to Rs

1,324.10 and TCS was up 9 per cent. While shares of Wipro fell one per

cent since January 1, HCL Technologies was up 17 per cent at the end of

March 31.

14. Wipro Chairman Azim Premji said that "recessions do not last,

resilient companies do... and come out stronger." In fact, the most

optimistic scenario is that when it is all over and the global economy is

back on even keel, the Indian leaders will be stronger than they are now by

virtue of having cut costs and acquired market share in the interim. All the

three firms have added significant new clients and announced multi-year,

multi-million dollar deals.

The downside is of course that even as new business is being acquired,

large old customers (the latest is Nortel) are going under, requiring a

redoing of sums to determine the value of the business that those entities

can now bring.

As all leading Indian software firms have a lot of cash in the bank, they will

easily tide over the present downturn. It is the job market which will have to

bear the brunt of the hard times. Declared recruitment targets for the

current year are likely to be met, but the proportion of freshers among the

new recruits is likely to go up in relation to lateral entries. Net intake among

the latter will be negligible.

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15.Kris Gopalakrishnan, CEO of Infosys said:-"It won't be safe. 2009 will

test employees. Only excellent performers will be safe. Companies will be

very selective about who they retain. Increments will be in single digits for

best performers and for average performers, it will be around 5 per cent.

16. Acc. to BFSI US players, Indian companies were flexible, delivered

good quality (resources), and gave a key lever in managing their SG&A

and time to market by freeing up more critical IT resources. They were

essentially partners in taking some of the fixed costs out of their SG&A.

Partnering in the operating business areas was still far away and is a tad

far even today. It is ironic that this crisis would have had a worse impact, if

Indian firms had partnered with the financial services entities much more

closely, tying up their invoices with the clients business outcomes.

The US BFSI players created large outsourcing chunks, made Indian IT

players learn from their experience, negotiated aggressively on pricing,

pushed for service level commitments, and rewarded with more work to all

who excelled in taking on their challenges. Between 1999 and 2008, the

share of US financial services revenue as a % of total revenues for the Top

3 Indian players thus went up from 25% to 38%.

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2.2 Joblessness in India & Life after Joblessness

A recession is a period of reduced economic activity. The current US

financial crisis has had quite an impact on India as well. According to

Sonal Aggrawal, CEO of Accord Group India, Companies are squeezing

all assets including human assets.

Source : Business Today

Source: Business Today

A report by the Ministry of Labour says over 5,00,000 jobs were lost during

Oct. to Dec. 2008. According to Pratik Kumar, Executive VP, HR, Wipro

Ltd., None of us has any clarity on the job market. In this kind of

uncertainty, organizations will not make hiring decisions.

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Source: Labour Bureau, Ministry of Labour and Employment

Life after Joblessness

Retrenchment is a reality in the workplace and managers and employees

have to prepare themselves for retrenchment and life after retrenchment.

Emotions that are evoked are:

Manager guilt

Employee Survivor guilt Employee fear of Am I next?

Loss of trust

Loss and grief

Retrenchment involves a bereavement process. Do management and

employees honor or even notice their departed colleagues? Are there

any corporate mourning rituals?

For the retrenched employee, all psychiatrist Elisabeth Kubler-Rosss five

stages of grief are present:

1. Denial This cant be happening to me

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2. Anger Why is this happening?, Who is to blame?, After all I

have done for this company!!!

3. Bargaining Make this not happen, and in return I will..., Perhaps

I could work part time?4. Depression Im too sad to do anything, Theres no point.; and

5. Acceptance Im at peace with what happened and I am moving

on.

The retrenched employees reality changes dramatically and he/she

faces many challenges: how to deal with the mourning, how to keep

energies up, how to keep motivated and positive; how to begin the job-

seeking process, and how to present when going on job interviews.

For the survivors - management and staff left behind - there are feelings

of guilt. Workplace survival is a double-edged sword: trust in the company

has been shaken and yet business continues. Survivors are not allowed to

dwell on their departed colleagues and have to move on with respect.

Retrenchment elicits a range of reactions; it motivates some to work

harder, while others could not care or give-up. The solution to the

retrenchment process is to acknowledge but not over-react.

Feelings and reactions during the periods of retrenchment:

Anger/hostility

Many individuals react to bad news with anger. In a retrenchment situation,

the underlying feelings may be hurt, disappointment and rejection, whichfind their outlet in loss of control or an angry outburst.

It is suggested that the manager stays calm, listens carefully and allows

the employee to vent. Managers should refrain from becoming defensive

and arguing back, and should remain as calm as possible and stick to the

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facts. They should resist the temptation to tell the employee that there is

no reason to be angry.

Denial/bargaining

The underlying feelings could be shock, disbelief or fear. Employees may

panic about what is going to happen to them. Managers should keep the

tone businesslike and professional, and explain the next steps clearly and

concisely. The message should be repeated as often as necessary - don't

negotiate or bargain.

Grief/sadness

The underlying feeling is most likely worry, fear or vulnerability. The

manager should give the person space to grieve, show compassion and

understanding (without trotting out platitudes) and clearly explain the next

steps. Don't attempt to minimise or negate what the employee is feeling.

Formal/procedural - The underlying feelings are controlled, suppressed,

unacknowledged or vengeful. The manager should allow time for

reactions, offer to answer questions and clearly explain the next steps.

Quiet - The underlying feelings or motivations of this type of reaction could

be controlled, passive or numb. Again, the manager should allow time for

reactions to develop, offer to answer any questions that may arise and

clearly explain the next steps. The message should be repeated as often

as necessary.

Relieved - The underlying feelings of this reaction may be optimistic,

fearless or certain. As with the above two reactions, managers are advised

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to allow time for reactions, offer to answer questions, explain the next

steps and repeat the message as often as necessary.

2.3 Impact of

US financial services operations on Indian IT sector

Approximately 61% of the Indian IT sectors revenues are from US clients.

If you just take the top five India players who account for 46% of the IT

industrys revenues, the revenue contribution from US clients is

approximately 58%. About 30% of the industry revenues are estimated to

be from financial services.

Top Line Impact

The US financial crisis puts a question mark on growth for Indian IT in the

short-to-medium-term. At the time of Q1 results, we saw growth numbers

that were revised down by 2-3% after sentiment started building up against

the US financial sector. Some larger players like TCS and Satyam have

officially denied any possible impact on growth. Going by Infy numbers, a

gloomy forecast can be expected.

However, there are some offsetting factors softening the revenue

slowdown - favorable Rupee-Dollar exchange rate, growth de-risking

through Europe, growth in non-financial verticals, and growth through

countercyclical new business (countercyclical to US slowdown). There may

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still be some hope of revenue growth from new avenues, albeit resulting

from the current crisis.

Merger activity is going to provide new outsourcing opportunities(as Infy

confirmed), as newly-merged entities may have to look at additional or new

providers to support the integration work and a broader global presence -

especially when you take into account the huge size of combined

international operations. In addition to the M&A activity, financial

institutions will be looking to

reduce theirSG&A costs quickly, which will opt for outsourced solutions that

impact the bottom-line - i.e. F&A BPO and some ITO and possibly some HRO

deals, where there is quick remediation of staff.

Bottom-Line Impact

It is very difficult to replace fixed costs with variable costs at short notice of

say a month. Hence, the focus will have to move to across-the-board fixed cost-

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cutting since making the costs esp. overheads and support costs variable at

short notice is impossible.

Exchange Rate:

The Rupee-Dollar exchange rate benefit for a company that would have done

zero-hedging, is in the range of 10-12%. However, if we analyze the top few

firms, the median seems to be around an offset benefit of around 2-3% on the

bottom-line, assuming some hedging. The Rupee has depreciated since the last

quarter by more than 10% which has had a positive effect on both top line and

the bottom-line in Rupee terms.

This is to an extent countered by the significant hedging done by the IT biggies,

the ramifications of which translated into forex losses for them in the June

quarter. This may bite them again this quarter. For example, TCS has hedged

about US$ 2.2 billion for the year at Rs.45/US$. According to the June quarter

results transcript, at Rs.45/US$, the mark-to-market loss on this would be about

US$100 million. And, considering the Rupee has moved beyond Rs.47/US$ into

the first week of October, this can be far worse.

There is also another issue with this currency pantomime facing firms like

Infosys, which derives 28% of its revenues from the Euro, British Pound and

Australian Dollar. The US$ has also been appreciating against these currencies.

These earnings translated into US$ will have a negative 2% impact on the

companys numbers. Taking these factors in to consideration, the currency

depreciation does not paint as rosy a picture as we can imagine.

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Cost-Side Controls

Wages are stabilizing and overall will have a positive impact on profitability

due to lower attrition and hence lower recruitment costs. Wages as a % of top

line also go down due to depreciation and labor market conditions. Similarly,

pushing higher variability into wages can bring more benefits.

Efficiencies Indian IT companies continue to be made of the same DNA as

during the dotcom days, and measures to shore up efficiencies are already

underway since we saw the exchange rate hit 39 to the Dollar. Some of those

gains are permanent since the processes have not been rolled back after the

Rupee started depreciating. Potential measures are voluntary salary cuts,complete moratorium on salary raises, travel reduction, tightening of promotion

spends, just-in-time hiring, hire-after-contract, etc.

G&A levers like payables, facilities costs, transportation and some of the

internal IT spends can aid more cost efficiencies. Relooking at the Selling,

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General & Administration (SG&A) expenses, with a view to be conservative

would help, especially the second Tier IT firms. There is a difference of about

10% between the SG&A of the top firms and the mid-level ones. Some conscious

pruning on this front will only aid the bottom-line to move upwards (hard because

of lack of economies of scale, but some aspects like making costs more variable

and postponing some of the support and operational spending, are achievable).

While we have looked mainly at IT, the ITES sector is joined at the hip with IT

industry, but with its own flavors. The impact in financial services operations will

be much larger, but, over the medium to long term, there will be a huge gain for

them from the increase in outsourcing and offshoring in the financial sector.

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2.4 Opportunities for Indias IT Sector

While there are growth-related challenges in the short-to-medium term,

there seem to be some opportunities for managing the bottom-line for the

rest of the year.

Despite the foreboding current financial crisis, the opportunities are:

Make the growth vs. profitability tradeoff early on during the slowdown

(which is now). Profitability levers are still available if growth is sacrificed

where required, and managed well.

Utilize some of the unavoidable fixed costs for implementing

investment ideas that have been on the backburner and could not be

kicked off due to high utilization.

Look for M&A opportunities in US, both in financial sector and non-

financial sector, especially where the option is to hold cash vs acquire. IT

companies to look for IP and product related investments especially in the

US.

Focus on operational efficiencies efficiencies that can help shore

up the bottom line especially in an attractive labor market and an

environment of budget/spend uncertainty.

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2.5 How companies are handling the recession

Retrenchment was the first reaction to the recession and has been

adopted by most sectors. Some companies have served the pink slip to

their senior and mid management executives.

Since the last eight years there has been a freeze on recruitment. Plenty of

older staff has now retired and to cope with the work temporary staff is

being employed.

Instead of cutting down on salaries and staff companies have increased

the working hours to fight the recession. This puts a load on the employees

and does not give a negative feeling like retrenchment or a salary cut.

However, the undercurrents still run through the workforce.

Yet another company has asked many of its employees to go on forcedleave to balance the sheets. Many employees like to accrue leave so that

they can go on a long vacation but unfortunately they are now cooling their

heels for the wrong reasons.

Internally, they have stopped recruiting more staff. The existing staff has

been reallocated projects and their work load has been stepped up to a

small level. Incidentally, we have taken on staff, but at a junior level. Thishas led to a kind of restructuring within the company. The juniors will be

performing on their own, with supervision from the seniors.

Training is a great way to deal with the extra time on hands. Trainer

Dominic Costabir says that some of his clients are doing the wisest thing -

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they are using the time to train their staff. This makes the staff efficient,

keeps them motivated and working well as a team. Complaints drop while

customer satisfaction, repeat patronage and profitability all rise. So both

my customers and I are on a winning wicket, adds Costabir.

Corporate social activities too face the flack when they actually cost a

pittance. They should be kept going as they promote a healthy atmosphere

and outlet for the employees and their families. Unfortunately, most

companies tend to cut down on the smaller costs where they should be

concentrating on the real big bucks like flying economy class, cut in car

allowance, foreign jaunts for the big boots etc. and above all strategies on

how to rake in the mullah.

Reactions of some IT Companies

The Indian IT industry is under tremendous pressure at present, with the

slackening of US and European economies. Companies are seeking

various ways to reduce their operational costs and one of the key

components in this will be the remuneration segment, which accounts to

nearly 40 percent of their operational costs.

Satyam shows door to 200 employees. Satyam Computer Services, the

fourth largest IT solutions and service provider, has now given pink slips to

200 employees in various centers. The move comes a few weeks after the

company announced its second quarter results. At a time when economic

slowdown is forcing companies to resort to retrenchment measures,Satyam insists that the move is not part of cost cutting. The move follows

the annual appraisal, which usually happens in July-September.

"They are saying that they are continuing to recruit people. But the thing is

that they are replacing high-cost human resources with low-cost HR as

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part of the cost-cutting exercise," a Satyam executive, who was given pink

slips recently, told Business Line.

But, S.V. Krishnan, Global Head (Human Resources) of Satyam, has a

counter point, "We reiterate that this is not unusual. This development

follows the appraisal where the 5-10 percent of staff in the bottom of the

performance pyramid is identified for Performance Improvement Plan."

Satyam Computer Services, Indias fourth-largest software exporter, is set

to review its hiring projections for this fiscal in mid-December. The

company has already scaled down hiring projections for this fiscal to 8,000

to 10,000 people against 15,000 that it had earlier projected, signalling

turbulent times ahead.

Satyam could also take a re-look at the guaranteed component of the

variable pay given to its 53,000-odd employees to prune costs. Any cut

could mean a lower take-home pay for the employees.

The remuneration package for the 53,000-odd employees comprises a

variable and a fixed component. The variable component is 10% at the

entry-level, 20% at the middle-level and 30% at the senior management

level. Half of the variable pay is a guaranteed payment. The other half is

linked to three parameters including the performance of the company, the

individual and the business unit.

Wipro to go slow with fresh recruitments

As the slowdown impacts hiring as well as attrition rates in the information

technology industry, leading recruiters like Wipro Technologies said that

while it will honor offer letters already sent out to freshers, the company

would defer recruitments by a quarter or so.

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A highly placed source in Wipro's Kolkata office said that it was now

waiting for more clear signals from its clients to take a call on further

recruitment.

According to Nasscom, the attrition rates had come down by 6-7 per cent

in the last few months due to volatile market conditions. In turn, impacted

fresh hiring by companies as well, as they now needed to hire fewer

replacement staff.

Adding to former Nasscom chief Kiran Karnik said that organizations nowneeded to decide who were useful, people with years of experience or the

ones with competence. "Experience has to be cumulative, it cannot be one

year's experience repeated over a number of years. In a fast changing and

growing technological era, even competence is a perishable commodity."

TCS freezes salaries

According to analyst firm Cowen & Company, TCS could bring down wage

increases during the financial year 2010 to almost zero. The analyst firm in

its note said, "Wage inflation is expected to moderate dramatically from

over 12 per cent to close to zero, which will help margins."

A TCS spokesperson confirmed this, saying, "Salary hikes in TCS next

fiscal are likely to be lower than this year. Wage hikes in India in FY09

were 10 per cent, as against 15 per cent in FY08," reports the Economic

Times.

The Indian IT industry is under tremendous pressure at present, with the

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slackening of US and European economies. Companies are seeking

various ways to reduce their operational costs and one of the key


nearly 40 per cent of their operational costs.

IBM plans to make big job cuts in its global-business services unit and

transfer much of the work to India. It's not clear how many jobs that will be

in the unit that employs about 180,000 of the company's almost 400,000-

person work force. And that's on top of big job cuts made already.

Another Indian IT major, Wipro, has already announced a seven to eight

per cent hike in wage for its offshore employees, and for Infosys it has

been in the range of 11 to13 per cent.

According to Vati Consultings Amitabh Das, the average hike for Indian IT

industry in the current calendar year has been between eight and ten per

cent, down from last year's level of 15 to 18 per cent.

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2.6 Major steps/ strategies adopted by the itcompanies to fight the downturn

Indian IT is facing the credit crunch and need stronger policies and better

grip on costs to deal slump in a better manner. Companies are seekingvarious ways to reduce their operational costs and one of the key


nearly 40 per cent of their operational costs.

1. Tata Consultancy Services

Founded in 1968, TCS is one of India's largest corporate houses. It

is also India's largest IT employer with staff strength of 111,000

employees.

The company began as a division of the Tata Group, called the Tata

Computer Centre. Its main business was to offer computer services to

other group companies. Soon the company was spun off as Tata

Consultancy Services after it realized the huge potential of the booming IT

services.The company posted a consolidated net profit of Rs 1,290.61 crore

(Rs 12.90 billion) for the first quarter ended June 30, 2008, an increase of

7.3 per cent compared to the year-ago period.

Business: IT services

Strategies adopted to Fight Downturn

1. Instead of cutting down on salaries and staff it has increased the

working hours to fight the recession.

2. The existing staff has been reallocated projects and their work load

has been stepped up to a small level.

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3. Relooking at the Selling, General & Administration (SG&A) expenses, with

a view to be conservative.

4. Tightening of promotion spends.

5. Just-in-time hiring, hire-on-contract basis.

2. Wipro

What started off as a hydrogenated cooking fat company, Wipro is today is

a $5 billion revenue generating IT, BPO and R&D services organization

with presence in over 50 countries.

Prem ji started Wipro with the 'idea of building an organization which was

deeply committed to values, in the firm belief that success in business

would be its inevitable, eventual outcome'. The company has over 72,000

employees.

Wipro's revenues grew by 33 per cent to Rs 19,957 crore (Rs 200 billion)for the year ended March 31, 2008. The net profit grew by 12 per cent to

Rs. 3,283 crore (Rs. 32.83 billion).

Wipro was the only Indian company to be ranked among the top 10 global

outsourcing providers in Global Outsourcing 100 listing. Wipro has also

won the International Institute for Software Testing's Software Testing Best

Practice Award.


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1. Go slow with fresh recruitments.

2. Moderate Wage inflation from over 12 per cent to close to zero,

which will help margins."

3. Show pink slips to many who are one or two year experienced.

4. Focus on operational efficiencies efficiencies that can help shore

up the bottom line especially in an attractive labor market and an

environment of budget/spend uncertainty.

5. Reduced overheads and support costs variable at short notice.

3. Infosys

Infosys Technologies Ltd was started in 1981 by seven people with $250.

Today, the company boasts of revenues of over $ 4 billion and 94,379

employees.

Under the leadership of N R Narayana Murthy, the company has become a

global brand. The company is now headed by Kris Gopalakrishnan. The

income for the quarter ended June 30 2008 was Rs 4,854 crore (Rs 48.54

billion). The net profit stood at Rs 1,302 crore (Rs 13.02 billion).

Forbes magazine named Infosys in its list of Global High Performers.Waters magazine rated Infosys as the Best Outsourcing Partner. The

Banker magazine conferred two Banker Technology Awards on Infosys to

acclaim its work in wholesale and capital markets in two categories -

Payments and Treasury Services, and Offshoring and Outsourcing.

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The International Association of Outsourcing Professionals (IAOP) ranked

Infosys at No. 3 in its '2008 Global Outsourcing 100'.



1. Put a load on the existing employees and does not give a negative

feeling like retrenchment or a salary cut.

2. Concentrating on the real big bucks like flying economy class, cut in

car allowance.

3. Reducing the Selling, General & Administration (SG&A) expenses, with aview to be conservative

4. Reduction in discretionary IT spends

5. Negotiated aggressively on pricing, pushed for service level

commitments, and rewarded with more work to all who excelled in

taking on their challenges.

4. SATYAM

Established in 1987 by Ramalinga Raju, Satyam has a staff strength of

51,000 employees. In 2008, the company's revenues crossed the $ 2-

billion mark.

'A simple, yet extensive management model to create value, which

promotes entrepreneurship, a focus on the customer, and the constantpursuit of excellence,' is the company's mantra for success. In FY2008, its

revenues saw a growth of 30.7 per cent to Rs 8,473.49 crore (Rs 84.73

billion) compared to fiscal 2007.

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The net profit stood at Rs 1,687.89 crore (Rs 16.87 billion), a growth of

20.2 per cent over fiscal 2007. Satyam is among the youngest IT service

companies to reach $1 billion in annual revenues. It is ranked No. 1 in the

ASTD (American Society for Training and Development) BEST Award,2007.



1. Take a re-look at the guaranteed component of the variable pay to

prune costs.

Half of the variable pay is a guaranteed payment.

The other half is linked to three parameters including the

performance of :-

The company

The individual and

The business unit.

2. Take a re-look at the hiring projections. The company scaled down

hiring projections for this fiscal to 8,000 to 10,000 people against

15,000.

3. Give pink slips to employees in various centers to reduce high-cost

human resources.

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4. Replace high-cost human resources with low-cost human resources

as part of the cost-cutting exercise.

5. Transportation and some of the internal IT spends can aid more cost

efficiencies.

6. Tightening of promotion spends.

5. HCL Technologies

HCL is a leading global technology player with annual revenues of $4.9

billion. The HCL Enterprise comprises two companies listed in India, HCL

Technologies and HCL Infosys. Founded in 1976, HCL is one of 'India's

original IT garage start ups'.

The HCL team comprises 53,000 professionals of diverse nationalities,

operating across 18 countries. At a time when India had a total of 250

computers, Shiv Nadar led a young team which passionately believed in

the growth of the IT industry.

Three decades later, he succeeded in creating a $ 4.9 billion global

enterprise. The company has reported consolidated revenue of Rs 3017.5

crore (Rs 30.17 billion) during the quarter ended March 31, 2008. Theprofit after tax stood at Rs. 81.5 crore (Rs 815 million).



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1. Served the pink slip to their senior and mid management executives

2. Temporary staff is being employed to cope with the work.

3. Asked many of its employees to go on forced leave to balance the

sheets.4. Stopped recruiting more staff on pay roll.

5. Scrutinizing IT projects for better returns

6. Reduction in discretionary IT spends

2.7 Measures available during recession

(A). Employers Perspective:

Let us put ourselves in the shoes of an employer coming across two options of

taking short term measures & reap the quick results or going a step further &

considering long term measures.

I. Short Term Measures available with the Employers:

Majorities of the organizations take either of the following decision

unilaterally:

1) Firing the Employees

2) Employees Pay Cutting

Let us apply a little thought to various Pros and Cons of both these options

exercised by the employers.

a. Firing the Employees:

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This is the worst guillotine like but the easiest resort handy with the

employer anxious to cut down the costs.

# Although it provides some economic relief to the employer by which he

can tide over the immediate crisis. However long term ill effects of such a

strategy cant be ignored. It is always better for an employer to weigh the

pros & cons of both the options in the broader perspective & decide

suitable action plan favorable to the organization in the longer run.

# Even if you happen to decide to fire a fraction of the workforce, do not

touch the 15 - 20% of your core employees, who happen to be

instrumental in generating majority of revenue for the company in any

form. Such core persons may be from Servicing, Marketing, Development,

Quality Assurance, Supply Chain or any other key domain of the

organization.

Try to keep such key persons satisfied, since these high performers can be

lured away by any company, even when markets are in bad condition.

However care need be taken that you dont over invest in such people

# Even if you decide to fire some of the people from the organization, give

sufficient notice to the employee that from such and such / reasonable

date, may be a month later or so, your services may not be viable for the

organization. This would certainly provide some breathing room to the

employee to settle down from the sudden shock otherwise. It is for certain

that organization is not going to ruin due to a loss of small amount of salarypaid to the employee during this notice period.

The act of firing of the employees at the blink of an eye, is extremely

inhuman & far from the social ethics & needs to be avoided.

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# Let us see, what the Indian Government says on job firing. Last year

during the start of financial crisis all over, Mr. Manmohan Singh Hon.

Prime Minister had rightly anticipated troubles ahead & had expressed his

grave concern towards gigantically rising pay packets in Indian companiesthese days. This time when there is deep trouble everywhere, Mr. Pranab

Mukherjee Hon. Union Finance Minister said on 21st Feb. 2009, Dont

fire the staff, cut their pay. He advised the companies, to go in for cutting

down the pay of employees at all level rather than retrenching the

employees.

Thus the advice of the Govt. of India appears like a boon to the employees

surviving under the shadow of demon of Pink Slip. However, how much is

the actual effect of such an advice on the organizations needs to be seen

.# Of course no employee will ever endorse the action of issuing pink slips

by the employer, which can have devastating effects on the employee &

his family. But the pink slipped employee does not have any choice, other

than accepting it with a smile, may be an artificial one. There are several

ways & means, a pink slipped employee can adopt for an alternative /

gainful employment.

b. Employees Pay Cutting:

This is the less painful measure compared to pink slipping or outright firing

an individual from his job. There are numerous ways an employer can

ease out the financial burden of the organization by passing on a portion ofit to his employees. Majority of the employees lucky enough to be in job

shall share the similar views. However there would always exist some

persons with differing opinion on this topic, on which one can have lengthy

debate.

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Various means by which an employer can tax his employees during

crisis can be like:

1) Compulsory Pay Cutting:

# While pay cutting is an extremely bitter pill to swallow, still it is a better

option than retrenchment.

# Compulsory pay cutting can be done across all levels - P to P (President

to Peon). The principle of More Pay More tax should ideally be applied

here as well. This will help in providing great motivation to the employees

who in turn shall be gladly willing to share the concerns of the organization.

# Flat or fixed % cut on the pay is certainly going to generate resentment

among the employees in middle or lower income bracket.

# Employees unwilling to share the burden by pay cut even under an

environment of transparency must not regret & should part ways with the

organization.

2) Freezing of all Bonuses:

# Must again apply from P to P. Bonuses may be productivity linked /

performance linked or any other. # Payment of bonus to a particular class

while taxing or even axing another one is discriminatory & going to be

counter-productive.

3) Forced Leave or furlough or sabbatical:

# It is another innovative cost cutting measure without indulging in

disruptive layoffs. It can provide some sort of economic breathing room to

the employers. Employer can ask employees to have furloughs or

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sabbatical meaning thereby the employee stays at home for 1 / 2 days in a

month or may be even more, with reduced or no pay.

# During the period of forced leave, the company can engage the

employees on some fruitful social assignments fitting their corporate

objectives.

# Many big IT companies of India have been reported to adopt this

approach following many industries in other countries.

4) Shutdown Holidays:

Increased periods of shutdown holidays can save large amount of

operational costs to the organization. At the same time, the employees get

added motivation, since they time they get more time to spend with their

families at the cost of no or a small cut in their pay packet.

5) Pay less than the Inflation:

Another way of decreasing the actual salary of an employee is by notincreasing it or providing an increase, which happens to be less than the

rate of inflation. This automatically becomes a reduction in pay.

II. Long Term Measures available with the Employers:

The repercussions / benefits of long term measures can be seen over a

period of time.

Few long term measures for the organizations are:

1) First of all, turn away from economic opportunism of short sighted

measures like blindly following the other companies without having any

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solid plans for the future. Learn from the experience of organizations in

many countries, which had hastily retrenched the talent just to re-staff after

a short while during an upturn.

2) Have a holistic view of the existing & futuristic requirements of skilled

personnel talent & try to improve the productivity of the present personnel.

3) Face the recession head on by aggressive marketing of the products or

services through aggressive consumer & retailer promotions. Send an

economical message to all, as to why it is beneficial to buy our companys

products.

4) Make a goal, which should not be mere survival during the ongoing

tough time, rather it should be aimed at enhancing or at least maintaining

the value of your company compared to your competitors.

5) Take suitable measures of generating adequate cash flow without

cutting corners on marketing & other strategically important expenses,

being the backbone of the company.

6) Improve the efficiency all across the organization by making it

comparatively flat organization with reduced hierarchical levels.

7) Reengineer the entire supply chain process across the organization.

Identify & eliminate NVAs or Non Value Added activities all across the

organization.

8) Prioritize the investments, which may be quite crucial for the company in

the times to come. Defer the investments as far as possible & conserve

cash for the future.

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9) Freeze the internal spending. This could apply to freezing new

recruitment, curtailing travel and third-party expenses on external training

and hiring of consultants etc.

10) Keep investing in future by devising creative ways & means to retain

the work force, especially the skilled ones and save the cost of training the

new work force when the gloomy days of economy return back.

11) Thus the solution is to adopt a fine line among large scale pink slips on

one hand & the likely demand for talent on the other. Such a demand could

crop up soon, may be in next six months or even later; may be at a time

when you wont be truly ready to take off again.

B. Employee Perspective:

This time let us put ourselves in the shoes of an employee working for an

organization. Although with lesser number of choices compared to the

employers, an employee needs to smartly plan his future & get prepared to

face any eventuality.

Following strategies shall be helpful to the employees during the time

of crisis.

(a)For the Lucky ones already in a Job:

The best mantras for tiding over the present critical time in your present

company are:

1) The best strategy: The need of the hour for the majority of the

persons is - Try to stick to the places where you are. Do more hard &

smart work and improve your value for the organization.

At the same time keep your antenna high & options for other companies

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open to meet any sudden challenge.

2) Share the burden voluntarily: In case your company is not planning

for any official pay cutting campaign, come forward & volunteer to shellout a portion of your pay for some period of crisis. This could help saving

the jobs of many fellow colleagues. Consider that a 5 -10% less pay is far

better for the individual as well as for the company as compared to a

devastating retrenchment.

3) Improve your skills: Try to be a multi tasking / plug-n-play guy whose

presence should matter to the company. With the development of such acaliber, you would create your own value, which shall be recognized

everywhere even in the depressed market. Then the demon of pink slip

shall stop bothering you.

(b) For the Unlucky Pink Slipped Ones:

There is absolutely no need of panic. Undoubtedly the situation is quitechallenging, never commit the mistake of nurturing depression, thinking it

to be the dead end of the road. Take it as a part of a cycle, which has

come and shall go sooner or the later.

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2.8 CONDITIONS PRECEDENT TO RETRENCHMENT OF

WORKMEN.

- (1) No workman employed in any industrial establishment to which this

Chapter applies, who has been in continuous service for not less than

one year under an employer shall be retrenched by that employer until,

- (a) the workman has been given three months' notice in writing

indicating the reasons for retrenchment and the period of notice has

expired, or the workman has been paid in lieu of such notice, wages for

the period of the notice;

(b) the prior permission of the appropriate Government or such authority

as may be specified by that Government by notification in the Official

Gazette (hereafter in this section referred to as the specified authority) has

been obtained on an application made in this behalf.

(2) An application for permission under sub-section (1) shall be made by

the employer in the prescribed manner stating clearly the reasons for the

intended retrenchment and a copy of such application shall also be served

simultaneously on the workmen concerned in the prescribed manner.

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(3) Where an application for permission under sub-section (1) has been

made, the appropriate Government or the specified authority, after making

such enquiry as it thinks fit and after giving a reasonable opportunity ofbeing heard to the employer, the workmen concerned and the persons

interested in such retrenchment, may, having regard to the genuineness

and adequacy of the reasons stated by the employer, the interests of the

workmen and all other relevant factors, by order and for reasons to be

recorded in writing, grant or refuse to grant such permission and a copy of

such order shall be communicated to the employer and the workmen.

(4) Where an application for permission has been made under sub-

section- 1 and the appropriate Government or the specified authority does

not communicate the order granting or refusing to grant permission to the

employer within a period of sixty days from the date on which such

application is made, the permission applied for shall be deemed to have

been granted on the expiration of the said period of sixty days.

(5) An order of the appropriate Government or the specified authority

granting or refusing to grant permission shall, subject to the provisions of

sub-section (6), be final and binding on all the parties concerned and shall

remain in force for one year from the date of such order.

(6) The appropriate Government or the specified authority may, either on

its own motion or on the application made by the employer or any

workman, review its order granting or refusing to grant permission under

sub-section (3) or refer the matter or, as the case may be, cause it to be

referred, to a Tribunal for adjudication :

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(7) Where no application for permission under sub-section (1) is made, or

where the permission for any retrenchment has been refused, such

retrenchment shall be deemed to be illegal from the date on which the

notice of retrenchment was given to the workman and the workman shallbe entitled to all the benefits under any law for the time being in force as if

no notice had been given to him.

(8) Notwithstanding anything contained in the foregoing provisions of this

section, the appropriate Government may, if it is satisfied that owing to

such exceptional circumstances as accident in the establishment or death

of the employer or the like, it is necessary so to do, by order, direct that theprovisions of sub-section (1) shall not apply in relation to such

establishment for such period as may be specified in the order.

(9) Where permission for retrenchment has been granted under sub-

section (3) or where permission for retrenchment is deemed to be granted

under sub-section (4), every workman who is employed in that

establishment immediately before the date of application for permission

under this section shall be entitled to receive, at the time of retrenchment,

compensation which shall be equivalent to fifteen days' average pay for

every completed year of continuous service or any part thereof in excess

of six months.

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2.9Top most firing IT companies in India

1) IBM Right now this is the most firing company for IT professionals. In

the last 6 months, this company has fired nearly 20% of their employees

because of BG check and performance issues. This is the most insecure

company from an IT professionals point of view. They dont have any

strategic plans at HR policies regarding employee security. No appraisals

(maximum10%)

2) Accenture This is second top most firing company. The firing rate is

around 5%. This depends upon outsourced projects; they have a unique

system where Accenture development centers around the world bid for a

project coming into the company. Currently Philippines centre is taking the

cake and the Indian centers are in a firing mode.

3) WIPRO Firing people with very frequent back ground checks and

firing them with out even experience letters and relieving letters (will

mention as terminated from services)but will promise the employees that

they will retain them. After the project is over they will fire away. Will

threaten of criminal cases against such employees if they oppose the

move and has also filed against some.

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4) Intel recently joined the league. Running in heavy losses, hence

firing 3000 employees in the Banglore center in a phased out manner.

5) CTS Has a steady firing policy (checking the Educational backgroundand previous employment and also employee performance in work). In a

Recent HCL walk-in, around 50% attendees were from this company.

6) CSC excellent package but fires folks in Background check and

those on bench regularly. Recently fired 400+ employees from its

subsidiaryCovansys.

7) Satyam Currently stopped firing. The Attrition rate is very high. No

firing from 2005 until now when 1000 employees were fired in Hyderabad.

8. Patni - They fired so many employees that currently they are facing

understaffing and deficiency with number of employees. Very high attrition

rate.

9) Keane India - This USA based company is always involved in firing

employees. Although they proudly say that they dont have hire and fire

policy. Recently they fired java and as400 professionals after which most

of the employees have started to pack their bags.

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2.10 Secure IT companies in India

1) Microsoft Has projects till 2050.

2) EDS Most secure company in India. Not laid off any of its employees

even during 2001. Has lots of projects in Defense and financial areas

3) HP Dream Company. In-house and outsourced projects

4) TCS A govt. Company.

5) HCL a good company to be in. Called as a retirement company.

6) HSBC this is the most secure company. It has never fired any

employee, even when they know that the employee is showing fake

experience.

7. Aricent a communication based software company, has never fired

any employee and gives great perks & incentives, lot of projects in kitty.

Minimal level of attrition.

8) KPIT Cumminns Infosystems Limited - This is the most secure

company not known to many. It has presently acquired CG Smith,

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Bangalore and has lots of projects in pipe line. Acquisitions plans will

continue.

CHAPTER 3 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research

problem. In it, step-by-step methods are followed to solve a particular

problem. It refers to a search for knowledge. It can also be defined as a

scientific and systematic search for pertinent information on a specific

topic. In fact, research is an art of scientific investigation.

Redman & Mory defines research as systematized effort to gain new

knowledge.

Research Design:

Research Design is the way in which the research is carried out. It works

as a blue print. Research Design is the arrangement of conditions for the

collection and analysis of data in a manner that aims to combine relevance

to the research purpose with economy in procedure.

The Study is based on exploratory research that is most suitable for the

present research study at hand.

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The development of items and scales in the questionnaire will be

based on the Qualitative study.

To improve the items and scales, and confirm face validity, a pilot

group study is supposed to be conducted.

Data Collection Method:

Two methods were used to assemble data on these sample companies. A

literature review provided historical data on the companies and enabledanalysis of previous scholarly work on these companies. University

databases as well as other secondary sources were used to compile a

picture of the recessionary periods and the past performance of the

sample companies.

The approach that is to be followed in the present study will be survey

research via direct face to face interview and secondary data will be used.

Sample Unit:

The sample for the research study is intended to be selected from five

different IT sector companies.

Sample Type:

Non Probability convenience sampling is supposed to use.

Sample Size:

A sample size of 50 respondents will be taken. Sample of the study is likely

to consist of 10-10 employees from each company.

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CHAPTER 4.

ANALYSIS & INTERPRETATION OF STUDY

Ques. In your views, what caused the current financial crises?

COMPANY Wrongdecisions by

US banks

Incompetent

executives

Flowed

economic

system

Excessive

greed

TCS 6 0 2 2Wipro 5 1 1 3

Infosys 4 2 3 1Satyam 6 2 1 1HCL 4 1 2 3

50% 12% 18% 20%

490%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TCS Wipro Infosys Satyam HCL

Excessive greed

Flowed economic system

Incompetent executives

Wrong decisions by US banks


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Respondents were asked what caused the current financial crises. Fifty

percent of the firms stated that Wrong decisions by US banks caused the

current financial crises.12 percent of the firms reported that Incompetent

executives caused the current financial crises. 18 percent of the firms reportedthatFlowed economic system caused the current financial crises. 20 percent of

the firms marked that Excessive greed caused the current financial crises.By

this I can say that Wrong decisions by US banks were the main cause of the

current financial crises

But this needs to be tested scientificallywhat caused the current financial

crises? For this purpose, chi-square method is used. And this factor has tobe tested on 0.5 significance level. The hypothesis assured here are:-

H0 :- Wrong decisions by US banks caused the current financial crises.

H1 :- Wrong decisions by US banks did not caused the current financial

crises.

COMPANY Wrongdecisions

by US banks

Incompeten

t executives

Flowed

economic

system

Excessive

greed

Total

TCS 6 0 2 2 10Wipro 5 1 1 3 10Infosys 4 2 3 1 10Satyam 6 2 1 1 10HCL 4 1 2 3 10

25 6 9 10 50

These are the observed frequencies of respondents. Now we have to

calculate the expected frequencies to the statements. It can be calculated

on by the formula as:

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Expected frequency = (Row Total * Column Total) / Grand Total

For Row 1 Expected Frequency =5

For Row 2 Expected Frequency =1.2For Row 3 Expected Frequency =1.8

For Row 4 Expected Frequency =2

Degree of freedom = (Columns -1 * Rows -1) = ((4-1) * (5-1)) = 12

2 = (Observed Frequency * Expected Frequency) / Expected Frequency

2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)2 = 0.8 + 2.33 + 1.556 + 0.7357 = 5.4217

The critical value of 2 at 12 degree of freedom at 0.5 significance is

11.340. The calculated value 5.4217 is Lower than critical value 2 in this

case we have to accept our NULL hypothesis and to reject the alternative

one , we can presume that Wrong decisions by US banks were the main factor

that caused the current financial crises.

Ques. According to you which sector is hardest effected by the

current crises?

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COMPANY FMCG Real Estate IT Banking &Finance

TCS 2 3 3 2

Wipro 1 2 4 3Infosys 1 4 3 2

Satyam 2 1 4 3

HCL 1 3 2 5

total 14% 26% 32% 30%

0%

20%

40%

60%

80%

100%


Banking & Finance

IT

Real Estate

FMCG

Respondents were asked which sector is hardest effected by the current

crises? Fourteen percent of the firms stated that FMCG sector is hardest

effected by the current crises. 26% percent of the firms reported that

Incompetent Real Estate sector is hardest effected by the current crises.

32 percent of the firms reported that IThardest effected by the current crises.

32% percent of the firms marked sector is financial crises.By this I can say

IT& Banking sectors arehardest effected by the current crises.

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But this needs to be tested scientifically whethersectors are effected by the

current crises. For this purpose, chi-square method is used. And this factor

has to be tested on 0.5 significance level. The hypothesis assured here

are:-

H0 :- IT & Banking sectors areleast effected by the current crises.

H1 :- IT & Banking sectors arehardest effected by the current crises.

COMPANY FMCG Real Estate IT Banking &Finance

Total

TCS 2 3 3 2 10

Wipro 1 2 4 3 10Infosys 1 4 3 2 10

Satyam 2 1 4 3 10

HCL 1 2 2 5 10

Total 7 12 16 15 50




For Row 1 Expected Frequency = 1.4



For Row 4 Expected Frequency = 3

Degree of freedom = (Columns -1 * Rows -1) = ((4 -1) * (5 -1)) = 12


2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)

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2 = 0.857 + 2.167 +8.75 + 2 = 13.774


11.340. The calculated value 13.744 is higher than critical value 2 in this

case we have to reject our NULL hypothesis and accept alternativehypothesis. While accepting alternative hypothesis, we can presume that

IT & Banking sectors are hardest effected by the current crises.

.

Ques. What is the best way to combat economic slowdown?

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COMPANY Retrenchment

Reductioninsalaries &wages

Moratoriumofrecruitment

Reductionin fringebenefits

TCS 2 3 2 3

Wipro 1 3 1 5Infosys 2 3 2 3

Satyam 3 2 2 3

HCL 1 4 1 418% 30% 16% 36%

0%

20%

40%

60%

80%

100%


Reduction in fringe benefits

Moratorium of recruitment

Reduction in salaries & w ages

Retrenchment

Respondents were asked, what is the best way to combat economic

slowdown? Eighteen percent of the firms stated that Retrenchment is the best

way to combat economic slowdown. 30% percent of the firms reported that

Reduction in salaries & wages is the best way to combat economic

slowdown. 16 percent of the firms reported that Moratorium of recruitment is the

best way to combat economic slowdown. 36% percent of the firms marked

that Reduction in fringe benefits is the best way to combat economic

slowdown.

55


56/103

But this needs to be tested scientifically, what is the best way to combat

economic slowdown.For this purpose, chi-square method is used. And this

factor has to be tested on 0.5 significance level. The hypothesis assuredhere are :-

H0 :- Retrenchment is the best way to combat economic slowdown.

H1 :- other than Retrenchment are the best way to combat economic

slowdown.

COMPANY Retrenchment Reductionin salaries& wages

Moratoriumofrecruitment

Reductionin fringebenefits

Total

TCS 2 3 2 3 10

Wipro 1 3 1 5 10

Infosys 2 3 2 3 10

Satyam 3 2 2 3 10

HCL 1 4 1 4 10

Total 9 15 8 18 50








Degree of freedom = (Columns -1 * Rows -1) ((4-1)*(5-1)) = 12


56


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2 = 1.556 + 0.667 + 0.75 + 0.889 = 3.862


11.340. The calculated value 3.863 is Lower than critical value 2 in thiscase we have accepted our NULL hypothesis, we can presume that

Retrenchment is the best way to combat economic slowdown..

Ques. What is the overall impact of the recession on companies?

OVERALL IMPACT OF RECESSION

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COMPANYPositiveImpact

Neutralimpact

NegativeImpact

TCS 2 3 5WIPRO 1 2 7Infosys 2 3 5

Satyam 1 3 6HCL 2 4 416% 30% 54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

TCS WIPRO Infosys Satyam HCL

OVERALL IMPACT OFRECES SION nagative Impact

OVERALL IMPACT OFRECES SION Nautral impact

OVERALL IMPACT OF

RECES SION Positive Impact

Respondents were asked to classify the overall impact of the recession on theirindividual firms in terms of three general categories: (1) positive impact -

recession heightened customer appreciation of company product lines, or the

company was hurt less than its weaker competitors; (2) neutral impact -

recession had no impact on the business; and (3) negative impact recession

reversed a previous positive performance trend, or it accelerated a previous

negative performance trend.

Fifty-four percent of the firms stated that the recession had a negative impact on

their business. Thirty percent of the firms reported that the recession had no

impact on their business. Surprisingly, sixteen percent reported that the

recession had a positive impact. Recession does not affect all firms equally.

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But this needs to be tested scientificallyWhat is the overall impact of the

recession on companies? For this purpose, chi-square method is used.

And this factor has to be tested on 0.5 significance level. The hypothesis

assured here are :-

H0 :- Recession has the negative impact on the IT companies.

H1 :- Recession has the positive impact on the IT companies.

COMPANYPositiveImpact

Neutralimpact

NegativeImpact

Total

TCS 2 3 5 10

WIPRO 1 2 7 10Infosys 2 3 5 10Satyam 1 3 6 10HCL 2 4 4 10Total 8 15 27 50

These are the observed frequencies of respondents. Now we have tocalculate the expected frequencies to the statements. It can be calculatedon by the formula as:

For Row 1 Expected Frequency = 1.6For Row 2 Expected Frequency = 3For Row 3 Expected Frequency = 5.4

Degree of freedom = (Columns -1 * Rows -1) = ((3-1)*(5-1)) = 8


2 = 2 (Row 1) + 2 (Row 2) + 2 (Row 3)

2 = 0.75 + 0.667 + 0.963 = 2.38

The critical value of 2 at 8 degree of freedom at 0.5 significance is 7.34.

The calculated value 2.38 is lower than critical value 2 in this case we

have accepted our NULL hypothesis, we can presume that Recession has

the negative impact on the IT companies.

59


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Ques. Companies have pursued a policy of retrenchment in response to

the recession?

COMPANY Yes No

60


61/103

TCS 6 4

Wipro 5 5

Infosys 7 3

Satyam 6 4

HCL 7 3

62% 38%

0%

10%

20%

30%40%

50%

60%

70%

80%

90%

100%


No

Yes

Respondents were asked, whether Companies have pursued a policy of

retrenchment in response to the recession? 62 percent of the firms stated that

Companies have pursued a policy of retrenchment in response to the recession.

38% percent of the firms reported that Companies have not pursued a policy of

retrenchment in response to the recession.

But this needs to be tested scientifically whetherCompanies have pursued a

policy of retrenchment in response to the recession? For this purpose, chi-

square method is used. And this factor has to be tested on 0.5 significance

level. The hypothesis assured here are :-

H0 :- Companies have pursued a policy of retrenchment in response to the

recession.

H1 :- Companies have not pursued a policy of retrenchment in response to the

recession?

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COMPANY Yes No Total

TCS 6 4 10

Wipro 5 5 10

Infosys 7 3 10Satyam 6 4 10

HCL 7 3 10Total 31 19 50








2 = 2 (Row 1) + 2(Row 2)

2 = 0.452 + 1.632 = 2.084


The calculated value 2.048 is lower than critical value 2 in this case we

have accepted our NULL hypothesis, we can presume that Companies have

pursued a policy of retrenchment in response to the recession.

Ques. If yes, what were the reasons of retrenchment?

COMPANY Cutting cost Reduction in Both

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lia/assets

TCS 3 4 3Wipro 2 2 6Infosys 4 3 3Satyam 3 2 5

HCL 2 4 428% 30% 42%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Both

Reduction in lia/assets

Cutting cost

Thirty percent of the firms in the sample reduced only lia/assets. Twenty eight

percent retrenched by reducing costs, while forty two percent retrenched by

reducing both costs and assets. Larger firms can easily sell off parts of their

operations, but small firms have fewer retrenchment options.

But this needs to be tested scientifically what were the reasons of

retrenchment? For this purpose, chi-square method is used. And this factor

has to be tested on 0.5 significance level. The hypothesis assured hereare:-

H0 :- Larger firms can easily sell off parts of their operations.

H1 :- Larger firms can not easily sell off parts of their operations.

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COMPANY Cutting

cost

Reduction

in lia/assets

Both Total

TCS 3 4 3 10

Wipro 2 2 6 10Infosys 4 3 3 10Satyam 3 2 5 10HCL 2 4 4 10Total 14 15 21 50









2 = 2 (Row 1) + 2(Row 2) + 2(Row 3)

2 = 1 +1.33 +1.619 = 3.949


The calculated value 3.949 is lower than critical value 2 in this case wehave accepted our NULL hypothesis, we can presume that, Larger firms can

easily sell off parts of their operations.

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Ques. What is the criteria for retrenchment?

COMPANY Poor

Performance

Less

Qualification

Less

Experience

Due to

recession

TCS 3 1 1 5Wipro 2 0 4 4

Infosys 2 1 2 5Satyam 1 2 3 4HCL 2 1 1 6

20% 10% 22% 48%

650%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Due to recession

Less Experience

Less Qualification

Poor Perf ormance


66/103

Respondents were asked, what are the criteria for retrenchment? 20 percent

of the firms stated that Poor performanceis the criteria for retrenchment. 10

percent of the firms reported that less qualification is the criteria for

retrenchment. 22 percent of the firms marked that less Experience is the criteria

for retrenchment.48 percent of the firms reported that they retrench human

factors due to recession?

But this needs to be tested scientifically, what is the criteria forretrenchment?. For this purpose, chi-square method is used. And this

factor has to be tested on 0.5 significance level. The hypothesis assured

here are :-

H0 :- Recession isthe criteria for retrenchment.

H1 :- Recession is notthe criteria for retrenchment.

COMPANY Poor

Performance

Less

Qualification

Less

Experience

Due to

recession

Total

TCS 3 1 1 5 10Wipro 2 0 4 4 10Infosys 2 1 2 5 10Satyam 1 2 3 4 10

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HCL 2 1 1 6 10Total 10 5 11 24 50

These are the observed frequencies of respondents. Now we have tocalculate the expected frequencies to the statements. It can be calculated

as:







2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)

2 = 1 + 2 + 3.091 + 0.583 = 6.674


11.340. The calculated value 6.674 is Lower than critical value 2 in this

case we have accepted our NULL hypothesis, we can presume that

Recession isthe criteria for retrenchment.

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Ques . Type of human factor used in retrenchment.

COMPANY Executives Front line

supervisor &

foreman

Middle

level

manager

Hourly

employees

TCS 2 3 3 2Wipro 1 2 4 3Infosys 1 4 3 2Satyam 2 1 4 3HCL 1 2 2 5

14% 24% 32% 30%

68


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0%

20%

40%

60%

80%

100%


Hourly employees

Middle level manager

Front line supervisor &

foreman

Executives

Respondents were asked, what are the criteria for retrenchment? 20 percent

of the firms stated that Poor performanceis the criteria for retrenchment. 10

percent of the firms reported that less qualification is the criteria for

retrenchment. 22 percent of the firms marked that less Experience is the criteria

for retrenchment.48 percent of the firms reported that they retrench human

factors due to recession?

But this needs to be tested scientifically what type of human factor used in

retrenchment. For this purpose, chi-square method is used. And this factor

has to be tested on 0.5 significance level. The hypothesis assured here

are :-

H0:- Middle level manager & hourly employees is the main target of the

companies.

H1:- Middle level manager &hourly employees is not the main target of the

companies.

COMPANY Executives Front line

supervisor &

Middle

level

Hourly

employees

Total

69


70/103

foreman manager

TCS 2 3 3 2 10Wipro 1 2 4 3 10Infosys 1 4 3 2 10Satyam 2 1 4 3 10

HCL 1 2 2 5 107 12 16 15 50








Degree of freedom = (Columns -1 * Rows -1) = ((4 -1) * (5 -1)) = 12


2 = 2 (Row 1) + 2(Row 2) + 2(Row 3) + 2(Row 4)

2 = 0.857 + 2.167 +8.75 + 2 = 13.774


11.340. The calculated value 13.744 is higher than critical

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