Pentasoft cuts jobs, wages to beat slowdown

Suresh Seshadri

CHENNAI: Pentasoft Technologies Ltd. says it is restructuring operations by

cutting low-productivity jobs and switching most employees to a variable wage to

beat the slowdown.

Pentasoft chief executive D Kannan told Reuters at the weekend that over 100

people had already been laid off from the firm's total work force of about 3,500

and said he expected the "right-sizing" to continue in the current

quarter.

"We are restructuring in such a way that each project group and division

has to manage its own revenues and costs and at the same time are looking at the

productivity of each employee and will be moving most to a fixed plus variable

salary structure."

The Chennai-based firm's sales grew 18.4 per cent year-on-year to Rs 1.55

billion ($32.9 million) in the April-June quarter.

Sales however grew less than half-a-per cent from the preceding January-March

quarter as the effects of a slowdown in its key US market saw revenues from the

US drop five per cent during the quarter to June, to 43 per cent of total sales.

Kannan said Pentasoft was reviewing the size and output of its core middle-level

staff including programmers and software analysts and was also looking to cut

back on entry level staff.

"Market conditions are forcing us to adapt and we are looking at people

who have not yet acquired latest technology skills, probationers and trainees

and may move some of these people out to contracts or outsource jobs like

implementation support." He declined to put a specific figure on the cost

savings that could accrue from the restructuring.

Training rejig



Kannan said a sizeable number of layoffs were at the firm's training division
where a sudden slump in demand for e-commerce oriented courses, on the back of

the dotcom crash in the US, had forced the firm to alter content of its courses.

"We realised we had to shift our focus and have recently tied up with

one of the leaders in embedded software, Mentor Graphics , for offering a niche

course in this growth area. We are also talking to IBM for some new courses

around their platforms."

He said Pentasoft was banking on the new courses as well as some of its

existing courses which combine domain knowledge, in fields such as banking, with

training in related applications. "We also expect CAD/CAM (computer aided

design and computer aided manufacturing) and GIS (geographical information

systems) courses to do well for us," he added.

Easing software flattens sales



Kannan said sales growth for the six month period to September was expected to
be flat from the corresponding period a year ago as average hourly billing rates

for its software projects had eased considerably.

"Our average rates for offshore are down to $18 from $22 and for onsite

work it has dropped to between $55 to $60 compared to $65 dollars charged

earlier. But I think the rates will sustain at this level and things should

improve after December."

Pentasoft which is a Tier I supplier of CAD/CAM software to Ford Motor Co

currently deploys about 20 people at Ford's US design facilities while another

25 professionals work on the Ford project from its Madras development center.

Kannan said the firm's current project and software product orders amounted

to $50 million, executable by end March 2002. "We are looking at an office

in either Brussels or in Switzerland for the European market and should be

opening it in the third quarter. We also expect our equal joint venture in China

with Shanghai Industrial to start giving revenues by the end of the third

quarter," he added.

Pentasoft shares ended Friday down 1.1 per cent at Rs 41.50, while the

broader Bombay index closed 1.28 per cent lower.

(C) Reuters Limited 2001.