TCS employees to work more!

Tata Consultancy Services (TCS), India's largest software company, is planning to extend working hours of its staff beginning April.

Sources familiar with the development said working hours could be increased between 10% and 15% from the current 40-hour, five-day week cycle.

A TCS spokesperson, responding to an emailed query on the move, said: "We continuously review our efficiencies and look at ways to serve customers better and improve our competitive position. Till date we have not made any changes in the working hours."

Analysts said this may well be how software companies offset the losses from repricing of their existing contracts.

TCS CEO S Ramadorai had told DNA Money two weeks back that about 60-70% of the company's clients were seeking repricing negotiations.

About 55% of TCS' contracts are of time & material type and the rest fixed-price contracts.

"This is a neat strategy to tackle two issues. Where prices have been reduced in time & material contracts, TCS can ask clients to also, as a quid pro quo, reduce the number of days in which the contract was agreed to be executed. This will automatically mean more working hours and billings per employee," said an analyst, who did not wish to be named.

"In the case of fixed-price contracts, it is simpler: it is up to TCS to execute the project as efficiently as possible. So squeezing more out of staff will certainly help margins," the analyst said.

"Larger clients are unlikely to accept more working hours but smaller, new clients are open to 9-hour-a-day per worker deals," the analyst said.

TCS has roughly 130,000 employees and a utilisation rate of around 77%. Meaning, more than three-fourths of its staff -- or over 100,000 personnel -- are gainfully employed at any given point in time.

Theoretically, a 10% increase in working hours has the potential to add half-a-million billable hours for TCS alone, considering that 55% of its contracts are the time & material type.

Analysts said TCS' pipeline of projects is pretty strong with about $1.5 billion of them going for ramp-ups in June 2009.

"Quicker execution cycles will help TCS deploy staff more efficiently," said Nitin Padmanabhan, IT analyst with Centrum Broking.

Another analyst with a domestic institutional brokerage, who did not wish to be named, said the flipside to this strategy is that utilisation rates will come down since contracts will be executed faster, although it will end up improving staff efficiency.

"And if utilisation rates fall, then there will be further staggering of fresh employee inductions," he added.