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Wednesday, Aug 27, 2003

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Profit per employee dips for software cos

Bharat Kumar

Chennai , Aug. 26

"THE more, the merrier" is an adage that seems true for IT companies.

Ironically, most IT companies may not wholly enjoy being merry this way. IT software companies are hiring more people, but are deriving less profits from each of their manpower.

Profit margins are being squeezed. This means that IT companies, to record increasing profits consistently, must realise more revenues through doing more work. This results in increased recruitment.

As can be seen from the table, companies the size of Infosys, Wipro and Satyam Computer are posting lesser profits per employee.

For Infosys, net profit per employee in a quarter has gone down consistently from the quarter ended June 2002, through March 2003 till quarter ended June 2003. Likewise for smaller firms such as Mastek, iGate Global Solutions.

Interestingly, VisualSoft Tech, a Hyderabad-based company with revenues of about Rs 35 crore for the quarter ended June 2003, has maintained its profits per employee between March and June this calendar.

Revenue per employee too has decreased consistently for most companies across these three quarters.

To reiterate the point made above, a clutch of these IT software companies have seen their manpower vault to 64,201 in June 2003 compared to 38,933 in June 2002.

Since profit per employee is only one indicator of a company's current performance vis--vis its earlier, Business Line also looked at the ratio between net profits and staff costs.

There too, the general trend seems to be decreasing net profits per rupee of staff costs.

In the case of Infosys, net profit as a percentage of staff costs has gone down from about 62 per cent for the quarter ended June 2002, to 53.76 per cent in March 2003 to 51.7 per cent in June 2003.

For Satyam Computers, the figures are 46.81, 44.33 and 43.8 per cent. For iGate Global, they are 13.45 per cent, 14.67 per cent and 11.5 per cent.

The Mumbai-based Mastek Group had figures of 44.53, 31.59 and 5.51 per cent.

Interestingly again, VisualSoft has seen this percentage rise from 50.55 in the quarter ended June 2002 to 52.35 per cent in June 2003.

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