How COVID 19 is impacting software companies

COVID 19, has become the most vexatious word for the entire world and has been declared as a pandemic by the World Health Organisation (WHO). Everyone is buzzing with uncertainties and the number of confirmed cases has been increasing day by day.

There is a huge and severe impact of coronavirus on domestic as well as international businesses across the countries. Indian software and services exports grew 8.1% to $147 billion in the fiscal year 2020, according to the National Association of Software and Services Companies. But in the near future, IT companies will face a slowdown of almost 3-8%  as per the Kotak Institutional Equities due to the business impact from COVID-19.

Although many Indian software companies have asked their employees to work from remote locations via conferencing or other tools. About 85% of the employees are working from home, even while continuing to support global clients.

Impact of COVID-19 on IT Industry

The It industry has been facing a huge pressure due to this pandemic. Organizations have shut their workplaces, processing plants and their stores. Many companies in India - IBM, Infosys,  Cognizant, Accenture, and other IT companies are dealing with severe loss. Some factors that have made the industry impaired with its attack.

Falling Disrupts Global Supply Chains

As per today's circumstances, the cost of supplies from China may further expedited freight costs, as well as from paying a premium to buy up supply and hold capacity. Many companies in India are working through alternative sourcing technologies and it will not be easy to identify alternative supply scenarios. The recovery of the supply chain will take a longer time and will affect the global supply in all nations.

Cash Flow Crisis for SMEs

Around 30% of SMEs have reported significant constraints on their cash levels as per the financial report. Mote than one-third of SMEs owners state that they feared their business won't be run unless they are able to secure some sort of finance. This creates a disturbing effect on the working capital and will not survive more if they were unable to secure the required finance.

Dealing with Decreased Productivity

The virus is likely to impact productivity on a group or individual scale. Employees may need to adjust sales or bonus targets in some situations to consult their sales plan to determine the parameters. 

Workers from SMEs are worst hit in India because some of them are not able to work from home, the companies have waived those employees and cut down their production. 

COVID-19  Impacts on Topmost Software Companies

Microsoft

The company is reporting revenue of 35 billion and a net income of $10.8 billion. Microsoft says that COVID-19 had a minimal impact on the total company revenue. In fact, it has boosted the demand for Windows PCs for both work-related activities and students trying to learn from home.

On the other hand, Tech-giant Microsoft has reduced job openings in the past three weeks. According to the data, there is a 46% decrease in the hiring activity of Microsoft and it has promoted all its events till July 2021.

IBM

The new CEO of IBM, Arvind Krishna, states that the range of coronavirus could contend companies to speed up their adoption of modern technologies like artificial intelligence and cloud. These two areas are among the more consequential opportunities for IBM. But it has lagged far behind cloud leaders Amazon and Microsoft in market share. 

IBM has made technological changes to help around 95% of its employees to work from home. CEO,  Krishna said that he wouldn't talk about how exactly the virus has impacted IBM's financial status. If everybody is going to take a hit from GDP issues, then obviously there will be some correlation. 

Cognizant

Information Technology services major Cognizant said it is withdrawing its growth forecasts for 2020 given the uncertainty in the environment amid the coronavirus outbreak. This will lead to a decrease in demand across the number of functions which has reduced the number of open positions for associates in the Associate Deployable pool  (ADP).

Cognizant will give an additional 25% in basic wages to about two-third of staff in India and the Philippines.

They introduced a Voluntary Separation Package for all the US associates who move into ADP between May 1 and Aug 31, 2020, to manage the costs. 

The company posted a drop of 16.78% in its net profit at $367 million for the quarter ended March 31,2020, as contrasted to $441 million in the corresponding period a year ago.

Infosys

Infosys said COVID-19 led slowdown has resulted in the termination of projects and may hit the company's profitability going forward. The Bengaluru- headquartered IT services exporter has highlighted the pandemic could be a major risk going forward as key clients across the US, Europe, and other prominent markets cut costs due to the economic impact.

In fiscal 2020, 61.5%, 24.1%, and 11.8% of the company's revenue were derived from projects in North America, Europe, and the rest of the world respectively. Wage pressures in India and the hiring of employees outside India are also likely to impact its margins.

TCS

Tata Consultancy Services contributes to 15% of India's software exports of $147 billion. The company will honor all the 40,000 campus offers it made during the year and assured existing employees it would not lay off staff. However, there would be no increments this year. The company has also frozen hiring until there is an improvement in business visibility.

TCS had cash reserves of $4.5 billion as of March 31. The company reported, that there is a decline of 1% in fourth-quarter profit and revenue rise by 5%. For the fiscal year 2020, it reported a profit of 32,340 crores on the revenue of 1,56,949 crore in terms of the rupee.

Accenture

Accenture is of the largest employers in the IT sector, hiring an average of about 2,500 people every month in India in the last one year. But at this time of crisis, the company lowered its revenue growth expectations for the fiscal year 2020 despite growth in the second quarter over the same period last year. 

Accenture reported revenue of $11.1 billion for the second quarter, whereas an increase of 7% over the same period last year. Now, it is to be assumed that the foreign exchange impact on its result in US dollars will be negative.

Wipro

All the software companies have been suffering from this pandemic where Wipro also added that COVID-19 impacted March quarter revenues by 0.7 to 0.8%. There was a disruption in the last two weeks of March, which means the quarterly impact of 3-5% of revenues. The company's employee count has reduced by 2.4%.

IT major Wipro said that its one of the campus in Pune is going to turn into the hospital . And then, it will be converted back to an IT facility after a year, according to a statement.


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