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For Information Technology (IT) companies work from home (WFH) has not benefited economically wiht the net cost savings yield at about 1 per cent.
In its ‘Work From Home (WFH) and the impact on Corporate Real Estate’ report by Knight Frank India said “As per the analysis, with consideration for an assumed 50 percent of employees working from home, net cost savings yielded for IT firms stood at around 1 per cent. This is after adjusting for additional cost borne by IT companies for setting up the home infrastructure.”
“Size did not matter”
Further, there is not much variation in saving across large, mid or small segments of companies. While business continuity planning stands as a reasonable argument in favour of a WFH model, cost-saving as a parameter does not support this ideology. “It is to note, in the case of large IT companies with owned premises and campus developments, the cost-saving will be even lesser compared to companies operating from leased premises,” it said.
According to the report, in terms of real estate operating expense, the IT industry spends around 4.3 per cent of its operating income annually on real estate costs. Smaller IT companies spend their 4.7 per cent on real estate, large IT companies 4.4 per cent and mid-sized IT companies 3.6 per cent. Overall, office space rent paid by IT companies constitutes 0.5 percent to 2 percent and the remaining is the cost incurred towards operating these facilities.
In India the IT sector has been the key driver of the office market. It contributed 44 per cent of cumulative office space demand in the last 10 years (2010-2019). Hence, the report dwelled into a deeper understanding of the saving yields from WFH from the prism of the cost structure of the IT firms.
The study was based on financial statements of the 119 listed IT companies representing 37 per cent of the industry operating income, and 28 per cent of the employee base.
“No value in long term”
Sugata Sarkar, Senior Director - Consultancy & Market Research, Knight Frank India said “For any IT/ ITeS services company, new work arrangements should bring in significantly greater efficiencies for it to be considered successful. However, as the survey clearly shows, end-users have not seen any remarkable increase in efficiency. At best, it has remained the same as before. Without significant improvement, the real value of WFH arrangement may not be impactful on a long- term basis.”
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