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IT firms turn innovative as clients appeal for cut
By siliconindia
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Monday, 16 March 2009, 18:56 IST |
3 Comments
Mumbai: IT firms like Infosys, Wipro and MindTree are leaving no stones unturned in their endeavor to cut cost and thereby remain floated in the market amidst the global economic turbulence. As these companies are inundated with demands from their clients to cut billing prices, they are churning out innovative offers to keep their margins intact, reports The Economic Times.
Though Infosys' clients are demanding price cuts in the range of 5 to 15 percent, the firm is not buckling, and instead, it is making some alternative and innovative offers.
"We are definitely not giving them what they are asking for. We are giving them alternatives such as more offshore work. This is like giving a discount, but not on the prevailing rates," said Infosys CEO & Managing Director S Gopalakrishnan.
"We can also leverage our bench and offer to some very specific clients some work to be done offshore for free. Here, again, the rates are not impacted," Gopalakrishnan added.
Many companies are working with clients to understand what their budgets and constraints are so that they can help offset their costs. However, the willingness to negotiate on price is dependent upon multiple factors.
MindTree Chief Operating Officer NS Parthasarathy said, "The percentage of discounts we are willing to offer to our customers depend on the volume of business done, kind of price arrangements we have with them, and their billing rates." For example, if a customer has a $5 million contract with the company at low billing rates, the pricing is not negotiable.
Wipro's clients also are asking for a 5 to 10 percent price cut, but the company has its own game plan. "We are talking to them, but the final number could be below 5 percent. Clients are essentially looking at reduction in their budgets and, therefore, we are discussing various pricing models. Like application and element-based pricing, wherein the client pays by the application he uses and the number of elements he uses and not based on the number of people working on the project," Wipro Chief Strategy Officer KR Lakshminaraya said.
However, the offshoring model is a hot favorite amongst companies. Offshoring work helps clients reduce their costs and increase margins.
