Shrinking OPM: I would say, OPM is under pressure because of following reasons:
1.Sudden Rupee appreciation (I'm using sudden appreciation because companies did not expect and they did not charged higher billing rate). If you look at the new contracts billing.. it's around 4-5 % higher... Any given point of qtr, rupee appreciation is not threat. Threat is sudden appreciation.. If it's appreciated gradually, companies (well managed) can handle it with higher billing rates and hedging.
2. Increase in salary:
well, U have to pay higher when engineer has gained some experience. At the same time companies have well balance telant pool of fresher as well as exp ppl. I personally don't take it as major threat. Last qtr was bad because of combined effect of Rupee and appraisals...
3. Less resourse utilization:
I put this like it's because of future project expectations. If we don't have resources on bench, we can not accept new project... U can say it's inventory for IT business... certain Inventory is required.... Resource utilization between 75 - 90 % is healthy.. If it's more than that, I would say company will face difficulties in accepting new project kick offs... and company growth can be doubtful in that case...
The only real comcern for most of IT companies is US slow down... Most of indian IT consulting firm have 60% or more revenue coming from US.... Well, at the same time US slow down will be blessing for ITeS... If core industries of US would stop growing, they will going to reduce spending on technology (they will have budget crunch)... But they will deffi outsource their business processes at cheaper rates (so that they can more focus on core activity and reduce cost of other activities)
Threat for product based company:
These companies have most of revenue coming from one or two particular products. Now here once again question is of geographical bifurcation of revenue and in which sector product is... if their product is doing well in US, once again we have US economy threat.... If their product stops generating revenue, company is gone....
However, that's 100 % correct that product based companies has good OPM but that is also under threat of employees. Because, product based company depends more on old employee.. I mean if someone has spent 4 years working on product, company cannot afford to let him go... and this kind of employees, start getting whatever they want. If company is not efficient in knowledge management, they will face above mentioned scenario and their OPM will go down...
Conclusion
Consulting as well as Product based IT companies, both have their plus - minus... we should analyze working efficiency of any company rather than product or consultancy....
I personally prefer consulting company rather than product. Because of balanced revenue in consulting companies... Just imagine, what happens to Iflex if flex cube is going with bad time???? What can happen to Nucleaous s/w, if Fin-one is going with bad time... What can happen to Financial Technology if MCX is collapsed...???? And now think, what can happen to Infosys, if Finacle stops performing.... (Infy won't have much impact because of balanced revenue)
