New Order For Infotech: The economics of Work from Home

Customers from outside India were concerned about data being leaked.

During conversations with stakeholders in IT/ITES companies, one common point that came up was that these companies were piling employees with work. People felt they were working much more than before.

WFH will save companies costs on a really large scale. Real-estate cost, transportation, canteen, etc are few of them. Also, if mobile service providers started offering excellent bandwidth in small towns, these employees need not come to big cities and can actually work from wherever they are. This will reduce cost of living for all, eliminate many civic issues that we face in large cities and also bring down the salary levels of all employees.

But how are employees in the IT/ ITES industry working harder? It boils down to one hidden cost saving that not many have latched on to.

An employee in this industry typically spends around 2 to 3 hours in commuting daily to office. This is getting added back to their working hours now. Let us do the math for TCS, which has 4,18,000 employees.

If each of them puts in 2 hours a day extra, it works out to 8,36,000 hours of extra work per day that they get out of their staff.

In the long run, if they have 75% of their employees WFH, this comes to around 6,27,000 hours of extra work per day. Let us assume 5,00,000 hours of extra work per day. If we assume 200 working days in a year, TCS will get 100 million extra working hours per year, free of cost. This is equal to having around 31,250 more employees i.e. 7% productivity at the least. Apart from this, there is the significant savings in cost related to real estate, food, transport and salaries (if great bandwidth is available in small towns and villages).

So, even if companies like TCS, Wipro, Infosys, Accenture see a dip of 10% in their incomes, they will come through neutral on profits. Obviously, therefore, companies have gone back to the Government via Nasscom and told them to allow WFH till March 31, 2021. The excuse – companies are not sure about revenues and so till things settle down, it is better to get employees to WFH.

The Government has realised that companies are seeing increasing profitability as a result of WFH. But, then, this will mean loss of jobs in the tertiary support sectors of the IT/ITES industry such as transport, catering, security and housekeeping services and so many more. It will also hit manufacturers of office furniture and other items such as stationery, etc.

So, they have told companies that permission is only till July 31, 2020. How do they control these companies?

They will not allow them to use VPN from home. Although currently, that permission has been given, it may not be extended beyond July 31.

It will be good to wait and watch what the corporates will do, come July 31. I expect various companies to give a lower guidance for the next two quarters and let their share prices drop in the stock markets. The Government may relax VPN conditions and then WFH will become a norm. The COVID-19 pandemic is certainly throwing up new opportunities for everyone. It is left up to us to use those opportunities constructively.