The second wave of COVID-19 will impact Indian IT services firms in the short term, with some firms mulling shifting more work onsite, and others seeing delays in projects getting off ground as many employees and families are affected.
According to analysts, while this is unlikely to cause a huge impact in business continuity, companies might have to think of alternatives if the situation persists.
Second wave impact
The number of COVID-19 cases in the country has increased over the last few weeks. On April 25, 2021, India registered 3.23 lakh new cases and 2,771 deaths.
This could pose a challenge to IT firms as for most of them, the majority of the workforce is in India.
Peter Bendor-Samuel, CEO, Everest Group, a research and advisory firm, said: “We have reports of human resources capacity in India being affected by 20-30 per cent, but this is likely a short-term impact. One of the complications is that if anyone in an extended family gets COVID-19, because of the poor medical infrastructure, it requires all hands in the family and that takes people out of production.”
Even as IT firms are stepping up employee-care efforts, they are mulling options to ensure business continuity. C Vijayakumar, CEO, HCL Tech, had told Moneycontrol in a recent interaction: “It is still early days and we are taking it day by day. The only comforting factor is that we have an onshore presence as well. So, wherever we are impacted, we are shifting some additional work onshore.”
CP Gurnani, CEO, Tech Mahindra, responding to Moneycontrol’s query on the impact of the second wave of COVID-19 during an earnings call on April 26, said: “There will be some minor impact. With India going through almost a lockdown, some projects may have a late start.”
This is because, Gurnani explained, during the beginning phase of the project, travel is involved and lockdowns and restrictions will impact them.
Phil Fersht, CEO, HFS Research, said: “Yes, this (second wave) will have a disruptive impact, but a sensible lockdown should radically push the numbers down, like it did in the UK, between January and March this year.”
“While there is some disruption to meetings and people fall sick, there is a determined drive from clients and service providers to keep projects moving forward,” he added.
Infosys and Wipro said in a statement that they don’t see any impact from the delivery perspective. TCS, in the latest earnings call, had pointed out that they don’t see any supply- side constraint.
Distributed workplace model
Distributed workplace model that most IT firms have in place will definitely help and should allay client concerns.
“Clients are understanding, and as long as this is a short-lived spike in COVID cases, it does not look like it will impact firms over the medium to long run,” pointed out Bendor-Samuel.
IT majors have delivery centres across the world. Even in India, employees are not concentrated on one region. As the remote working model continues to be in place, employees are working from multiple locations, including Tier 2 cities, reducing the risk.
For instance, in addition to India, HCL Tech has delivery centres in Sri Lanka, and Vietnam, apart from client locations. Tech Mahindra has seven delivery centres in North America, five in the Asia-Pacific region and four in Europe.
TCS, Infosys and Wipro have multiple centres in the US and Europe.
However, if pandemic-related issues persist for more than 2-3 months, IT firms will have to look at alternatives, added analysts.
“If the situation persists, I mean that we lose 30 percent-plus of capacity, we may see clients and the industry taking action to move work onshore or to different destinations,” Bendor-Samuel said.