BANGALORE: Falling margins and an unplanned salary increase have pushed Infosys to embark on a major austerity drive. The details are not clear yet, but it certainly includes a freeze on business class air travel and deferment of joining dates of 17,000 campus recruits.
The IT major’s CEO, S D Shibulal, has sent a mail to employees saying that the company’s expenditure for the year had risen too high on account of its Lodestone acquisition and salary increase. The mail goes on to say that the cost-cutting measures would be implemented in a phased manner.
A company spokesperson said, “In a tough business environment, Infosys has decided to take certain cost optimization measures. These are necessary for the company to continue making strategic investments and afford the rollout of the compensation increase.”
The joining dates for campus recruits have been deferred for three months from the date of joining that was communicated to them previously. Several people tweeted that their joining dates had been extended to February; some said April.
The Infosys spokesperson said the company would honour all campus offers. The company has introduced an online training programme to keep these new hires engaged till they formally start work. “The completion of this training will not only give these recruits a headstart in their career with Infosys, but also reduce their planned six months training programme at our Mysore campus by up to two months,” the spokesperson said.
Anticipating a bevy of queries from thousands of campus recruits for specifics around the deferred joining dates, Infosys has set up an exclusive online chat line. “This will help us address additional queries from them and also help them gather details about our online training programme. This will be in addition to our personal communication and addressing queries through emails,” the company said.
There’s also a freeze on long-haul business class air travel by its senior executives, including the CEO. “Business class is a privilege available to senior leaders in the company for long haul travel. In our drive to optimize travel costs, the senior leadership has decided to lead by example and forgo this privilege,” the company said.
Infosys’s operating margin has been dropping consistently for several quarters now. In the quarter ended December 2011, it had a 31.2% operating margin, but this was down at 26.34% in the last quarter. The September quarter alone saw a surprisingly sharp fall of 166 basis points. The salary increase of 6% announced last month, which many believe was done under pressure because rivals had given increments earlier in the year, will increase margin pressures in the coming quarters. Infosys normally announces salary increases in April, but this year it did not do so citing uncertain business conditions.