IT majors reduce billing rates by almost 40 percent

Bangalore: In move to reduce the burden on their clients due to recession, IT majors are cutting down on their billing rates by almost 35-40 percent. According to analysts, the billing rates have touched the lowest ever rates at $16 per hour and they predict that this will continue till first quarter of 2010.

Avinash Vashisth, Chairman and CEO, Tholons, an offshore advisory firm says, "Last month has seen unprecedented cut in billing rates even for existing customers." According to Vashisth, large testing services, and of services of similar value, $16-20 is the prevalent rate. These rates are almost 30-35 percent lower than the rates being charged earlier this year and steeper than the 20 percent cut that British Telecom had demanded from Infosys and Tech Mahindra earlier this year on some old and new projects. Also higher-end projects like SAP have faced pricing cuts of around 25 percent, which is again more than what it was earlier this year.

According to The Economic Times, top IT firms are offering such rates in the form of introductory discounts for new clients, and for a year or two for existing clients. Another worrying factor for the IT firms is that despite the rate cuts, there has not been a corresponding rise in the volume of deal flow, in either highervalue or the lower end services.

Diptarup Chakraborti, Principal Analyst at Gartner, says that he does not see the situation improving before Q1 or Q2 next year. "Good old days are not coming this year for sure," Chakraborti said. A Gartner study says prices of IT services in outsourcing are anticipated to shrink well up to 2010 due to an uncertain economic climate, IT budget constraints and general market consciousness.