Saturdays have never been this good for Park Hotel employees across the country. It’s a half day now for all, barring those who have to directly interact with guests. But, mind you, the management is not bent upon making life easier for its employees — it’s on a conserve electricity campaign. Lights have to be switched off when they are not needed, thermostats of air-conditioners can’t be set too low and only a section of all coffee shops is to be kept open during lean hours.

“We are sensitising our staff,” says Park’s Noshir Marfatia, national director, sales and marketing. “Even if each employee saves Re 1 a day, that’s Rs 2,000 a day per hotel.”

It’s count-the-pennies time in a Corporate India buffeted by rising costs and a slackening of demand. So a Gurgaon-based business process outsourcing (BPO) company is looking very carefully at the kilometres covered by taxis ferrying its employees every day to work, and then comparing them with the distances logged in bills.

Clearly, companies are battling troubled times. Soaring raw material and fuel prices have pushed up costs for manufacturing enterprises. The Reserve Bank of India’s steps to limit cash floating around in the system to curb the galloping rate of inflation has increased the cost of borrowing. With the United States’ economy starting to run out of steam, not only is there less business for information technology (IT) and business process outsourcing (BPO) firms in India but clients are also negotiating hard on prices.

That partly explains the cost cuts. Purses aren’t exactly being snapped shut, but with profit margins coming under pressure their strings are being tightened. Companies are reviewing hiring and expansion plans, curbing travel and frowning upon office parties and lavish gifts so common in the IT and BPO industries. According to Karthik Shekhar, general secretary of the Union for ITES Professionals (UNITES), several IT companies have downgraded the role of the chief fun officer who used to play a major role in keeping employees happy. Infosys has cut the number of its subsidised canteens in Bangalore from seven to four, says M.K. Swaminath, president, IT Professionals Forum, a body of employees in the IT and BPO industries.

Of course, few admit that the belt tightening is crisis-driven. “We’ve always been a cost-efficient company,” is the standard response from individual companies.

High-flying executives are being grounded. With airline companies hiking air fares by about Rs 1,100-1,200 per ticket, outstation trips are being curtailed. Most of the IT majors — Wipro, Infosys, Tata Consultancy Services Satyam and HCL — have restricted air travel, asserts Swaminath.

Overnight train journeys — wherever possible — are being encouraged. People who easily hopped from one city to the other are taking circuitous routes — all for cheaper tickets, says Kris Laxmikant, chairman and managing director of the Bangalore-based placement firm The Head Hunters.

The airline business, indeed, has been affected. “Passenger growth hasn’t been negative,” notes Sandeep Shenoy, strategist at Mumbai-based financial services firm PINC Research, “but it is definitely below 10 per cent.”

Airlines (which did not respond to queries about their state of business) are also curbing costs. A decision not to pay commission to ticketing agents from October 1 is being opposed by agents. A Mumbai-based low cost carrier has cut flights and returned planes it had taken on lease, while a Delhi-based firm is leasing out its own planes.

There’s evidence that companies are encouraging their executives to video conference (VC) instead of travelling on business trips. The Bangalore-based web conferencing firm Webex has seen business soar over the past six months. “Not only are we getting more enquiries from new customers but existing customers are ramping up usage,” says managing director Kiran Datar. There’s also a growing demand for technology that allows PowerPoint presentations and spreadsheets to be shared. The cost: 50 per cent to around 90 per cent cheaper than physical meetings.

Executives travelling between Mumbai and Pune, used to simple luxuries such as a dedicated taxi, now have to often travel by bus or shared taxis, says Laxmikant. Swaminath adds that at Infosys and Wipro, the use of official taxi services has been restricted to employees on night shifts. Infosys has also halved its fleet of 200 vehicles. Cab routes are getting longer in both Bangalore and Delhi and companies are putting in more employees per cab.

What is more, companies have told their executives who cannot avoid flights to return the same day to save on hotel costs. “Yes, we are finding a slack in demand,” admits Park’s Marfatia. Hotels in Bangalore, Hyderabad and Chennai, where five star ones cater largely to business travellers, have seen a 5-8 per cent drop in occupancy rates. Take or pay arrangements — companies pay a fee for assured room availability — are disappearing, notes Amol Rao, an analyst at PINC Research. Hotels are also seeing a decline in bookings towards the end of a week. “Weekend stays are clearly being discouraged,” says Rahul Pandit, vice-president, operations, at Lemon Tree Hotels, a mid-market hotel chain.

Big expenditure heads are also being scythed, with recruitments being deferred or companies just taking a longer time to issue offer letters. At the Indian Institute of Information Technology Bangalore, placement officers had to struggle to bring employers for campus interviews this year. Placements, which were normally completed in three days, took 10 days.

The slowdown is happening across sectors, says Sampath Shetty, vice--president of the Bangalore-based staffing firm Teamlease, which has seen a 60 per cent drop in business from its key clients. The infrastructure, automobiles, construction and oil and gas industries are still hiring in large numbers. But the IT and BPO industries have seen a sharp decline, notes E. Balaji, chief executive officer at the Chennai-based Ma Foi Management Consultants.

Of course, the situation today is nowhere near that in 2000-2001,when a combination of the 9/11 attacks and the bust in the dotcom industry saw businesses shrinking. Hiring then, says Balaji, was down by 30 per cent — double of what it is now.

Yet austerity is, unquestionably, the hallmark now. BPO and IT firms are reviewing reserve and shadow resources which were pressed into service during busy times, says Ameet Nivsarkar, vice- president of the National Association of Software and Service Companies, a body that represents the interests of the IT industry. With business declining, project teams are also becoming leaner. Companies are cutting down on the time lag between projects from a few weeks to a few days. Karthik Shekhar of UNITES says large BPO firms are making employees work six days a work, instead of five, without paying overtime, something that could not be confirmed.

What about salaries? The age of dizzying raises of 20-40 per cent is becoming a thing of the past, as hikes now range between 8 and 15 per cent. People switching jobs no longer expect a 50-60 per cent hike — they have to be content with a 15-20 per cent rise. A large IT company looking for a telecom professional with three years experience, says Balaji, halved the salary it was willing to offer from Rs 6 lakh to Rs 3.5 lakh a year.

While such aggressive cost control is happening mostly in service industries, manufacturing companies too are feeling the pinch. If they’re not clamping down on spending, points out J.K. Jain, chief financial officer of the Delhi-based DCM Shriram Consolidated Ltd (DSCL), it is because they have learnt to keep costs down since the early 1990s when they were exposed to global competition. There’s little question, he says, of reducing salary hikes or other benefits in difficult times, when they need employees to be more motivated.

Still, the bad news is not universal. Business at mid-market and budget hotels is brisk. Lemon Tree, whose room rates are nearly half of those in five star hotels, saw a 4-7 per cent rise in occupancy in April-June 2008 over April-June 2007 at its hotels in Delhi and Pune, even as room sales at big hotels in these cities slumped. Executives who take up rooms for a length of time also seem to be shifting to cheaper hotels, with this category accounting for 30 per cent of Lemon Tree’s clients at its Pune hotel (against 20 per cent last year) and 25 per cent at its Gurgaon hotel (against 12 per cent last year).

As they say, every cloud has the proverbial silver lining.

IN

Trains
Budget hotels
Modest salary hikes

OUT

Air travel
Five-star hotels
Huge salary hikes