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Infosys redeploys staff to improve utilisation rate

NetScribes/Ganesh Ramamoorthy

The decision of Infosys Technologies to double its staff strength with Aetna Inc, a US-based healthcare insurance and related services company, is expected to improve its employee utilisation rate.

The number of Infosys employees working for Aetna will go up to 500 by the end of 2001. Analysts muse that this surely is good news for Infosys. Some analysts also feel that such additions may not come through easily for other clients in the short term.

Infosys provides consulting, support and software services to Aetna, which serves more than 19 million health care members, 14 million dental members and 11 million group insurance customers.

The Indian software major came under sharp criticism after it announced a lower staff utilisation rate of 77.6 per cent for the quarter ended December 2000, compared to 80.5 per cent in the preceding quarter.

As of December 31, 2000, 2,075 of Infosys' total 9,000-odd employees were on the bench and training, up by over 80 per cent from the previous year. The company attributed the lower utilisation rates to a higher bench, which it said was strategic to tap new growth areas.

US-based brokerage house Merrill Lynch had, in fact, lowered its Infosys 2001-02 earnings per share estimates by 5 per cent owing to a likely slower growth in per capita productivity in a harsher US economic environment.

With the company going slow on recruitments until June 2001, analysts say that doubling of manpower for Aetna is a redeployment move aimed at improving its manpower utilisation rate.

The move also follows announcements from global tech majors like Nortel, Lucent and IBM that they would cut billing rates for all IT vendors in the wake of the US slowdown.

Even as it maintained that it had not been affected by the slowdown, Infosys quietly lowered growth targets to 40-50 per cent from earlier 50-60 per cent.

US-based brokerage house Credit Suisse First Boston (CSFB) recently said that top companies, including Infosys, would be forced to redeploy their staff in a profitable manner while second-tier companies would undercut to maintain employee utilisation rates. "Many are expected to implement a temporary, entry-level hiring freeze, postponing the date of joining and re-examining next year's hiring plan," CSFB said in a research note released early this month.

On Thursday, the Infosys scrip closed at Rs 4,878.75, up Rs 169.60 from its previous close, with volumes of over 331,000 shares on the Bombay Stock Exchange.

The benchmark BSE IT index closed at 1,936.70, up 98.50 points or 5.36 per cent. At its current market price, Infosys trades at 50 times its estimated earnings for 2001-02.

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