Case Study
N-sight is a consulting firm based out of Bangalore with headcount of over 30,000. The firm reported revenue of about $2b for year ending 31st March 2010. About 80% of the staff operates out of the office in Bangalore, 5% of the professionals travel around to sell the services and the remaining 15% work onsite at client locations. The firm is under severe pressure to provide services at reduced rates. The firm has trimmed expenses in several ways to reduce the cost of service and survive in the economic down turn.
The CFO of the firm has already curtailed the following business related expenses - Entertainment (official dinners, employee entertainment and other related team building events), Travel (Non-client travel, long term stay in expensive hotels), Talent related expenses (Recruitment and trainings), Capital Expenditure on Facility and Technology (Fixed assets, equipment, consolidating office locations, software purchase and upgrades), Eminence building (Research, marketing and brand building), Supplies (Re-negotiating with vendors), Corporate Social responsibility (community involvement activities, donations and scholarship) and other Admin expenses (Transport, air conditioning, paper based products, beverages and snacks, courier and administrative staff). Also, support services were re-organized.
On second round, to achieve the desired cost of services, CFO of the firm focused on improving the productivity and reducing the employee related cost by restructuring and re-organizing the business model.
The number of headcount in the bench was reduced to improve the utilization of the firm. Also, time spent on training was reduced to improve the billable hours per person. This enabled the CFO to improve utilization of the firm from 80% level to above 90% level. Also, headcount was aligned to business need either by combining similar services or by providing the individual additional responsibility. In April, the company reduced the workforce by 4,000 and brought it to current level of 30,000. Also, CFO advised the business leader to improve span of control and reduce the average salary cost per person. In this endeavor, the business leaders were more focused on hiring from campus rather than lateral hires.
Most of these actions resulted in “trimming the fat” and have not significantly impacted the overall operations or business so far. The reason quoted by CFO in his last update to CEO is that firm’s commitment to provide quality service to the clients, build the eminence in the market place and continue with to reward employees with salary hikes.
Balance sheet analysis of FY10 statements revealed that about 60% of revenue is spent on salaries of the client service personnel. 5% of the revenue is spent on marketing and business development expenses to improve the market share in new geographies. General and admin expenses accounted for 7% of the revenue. Another 8% of revenue was incurred on depreciation and finance cost.
The New P&L of the firm put together by the CFO projected revenue of $2.2b. About 65% of the revenue was incurred on salaries after salary revisions. Marketing, admin and finance cost accounted for 4%, 5% and 11% of the revenues.
1) Summarize the issues, in the case described above.
2) Identify alternative solutions for the firm if the global economy (a) improves or (b) continues to be stressful for next 3 years.
The solutions should describe what the firm should do to:
(a) Continue operating with lean expenses
(b) Provide quality services to the clients at reduced prices
(c) Build eminence and improve the market share in the new geographies
3) Define the assumptions if you have made any to analyze the data provided and develop the alternative.
4) Evaluate alternatives and recommend a preferred solution. Define criteria for recommending the preferred solution to the firm for both the scenarios.
The solution is expected to be clear, concise and creative & must be covered within the 12 slides provided to you.
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