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Old 17th May 2007, 22:57   #106
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Sir, I maybe doing an Internship But I'm working on RFP and Value Proposition models with global clients with Pricing Models and Evaluations, I do have a fair enough idea of what comes to me and what I have to put across..After 2 years of working in the Industry..No Offence Taken !
Medium firms do have Asset and Capital Managers..Depends on how and What is the scope of the company..!

These are things which the company should be prepared for, If they don't they are Lousy and Unplanned..!
In other words, your limited experience is with global clients. Are you familiar with the financial setup of companies with less than 1000 or 500 employees? What about companies with less than 100 or 50 employees?

What about companies that have no asset to juggle around, my company or tsk1979's company survives on regular inflow of cash. We are not public companies and don't have any short-term or long term assets. This is the case with most companies with less than 500 employees.

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When you cater to global clients you need to take all these factors into considerations, Infact these days You can outsource your entire Asset Management to ICICI and some other banks..!

But for any Company thats not prepared, Sorry Sir..This is no excuse to discredit Rupee Rise.
We invoice our customers on a monthly basis for the services rendered. There is no asset to manage, even if I had, I won't trust ICICI to manage it.
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Old 17th May 2007, 23:02   #107
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I guess the concept of a startup is very very alien in India. You will be surprised when you realize what kind of budgets the startup has to manage.
I know many senior people who made a startup and then had to dissolve all their savings etc., the startup did not do too well and they were left really tight.
When we talk about startups we say "Hotmail" but what we don't realize that for every hotmail there are 10 arzoo's!

Second point 15% reduction is not small fluctuation in rupee! Its a major one and has upset many companies who rely on VC funding model, or have majority of their clientage abroad. Big houses can fall back on shareholders, and have enough assets to mitigate impact.
But for small companies such a mighty fall over such a small time spells big disaster.
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Old 17th May 2007, 23:04   #108
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I respect both Yours and Tsk's Inputs on this issue, Since you guys have been working much more than I have- Please look at my reply from a learning point of view,It would make a good case once I'm back into my MBA.

Ya I have worked for a year with a IT Solutions firm of only 170 people, basically giving out, When they bid for a Proposal they consider these factors, I suggest sir Why don't you once check with the Marketing and Sales , Finance Teams in your company, I'm sure they will be able to resonate the Buffer.

HSBC,IDBI,Yes Bank also do the work...! Now choosing between a good Asset Manager is not a choice its a matter of Right Business Decisions.

You can also put in the clause on re-negotiable Forex rate in the contract when the Rates can be resulting in Extreme High or Low ends..! This is a general practice as far as I'm aware of...!

Small companies don't shutdown, they either grow big or get absorbed by the larger players...!

There was a time when everything was dicated to the Small company and being desprate for the contract they used to accept terms..But today even small companies are managed smart and have become demanding..!

No one can predict the Exact exchange rate- Increase or Decrease...But the company does make some provisions for the Impact.

Its just like saying- When Petrol prices increase, You pay more for transport, Vegetables, other commodities..So with increase in petrol price does Your Salary go up Immediately, What about companies that run Company Cabs or Buses- Diesel Gensets..There running expense goes up so they start to cut salaries, payments..Every good company Big or Small does make Buffer provisions to manage Financial Control.

The First Impact of Cost cutting is Perks and Allowances reduced, Followed by less expenditure on Training,Outsourcing of Internal High Cost Operations, Last Lay offs..!

I have yet to hear about a company that shutdown because the Exchange Rate Killed them..!

Last edited by wolfinstein : 17th May 2007 at 23:19.
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Old 17th May 2007, 23:20   #109
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Ya I have worked for a year with a IT Solutions firm of only 70 people, basically giving out, When they bid for a Proposal they consider these factors, I suggest sir Why don't you once check with the Marketing and Sales , Finance Teams in your company, I'm sure they will be able to resonate the Buffer.
wolfinstein, drop the sir. Nobody calls me that at work. Ok, what kind of asset management did this 70 people company follow?

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You can also put in the clause on re-negotiable Forex rate in the contract when the Rates can be resulting in Extreme High or Low ends..! This is a general practice as far as I'm aware of...!
We invoice them from the US office, therefore our clients are not exposed to any forex issues.
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Old 17th May 2007, 23:26   #110
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Ok the company followed the contract proceeding for CAD support with a stipulated and agreed contract, The company used to accept the Proposals with the Forex Negotiable Terms either on Spot Basis or With Floating terms with an Extreme end Buffer attached on mutually agreeable term to both parties. Entire Asset Management with HSBC.

See This is what I was told , At that Time I was a Trainee still in College working part time in Back office and Marketing development.

The Practice of Buffer and Margin was shared in American Express when I was working there ( Large Company Global Back office Operation for In-House)

Currently my Summer Intern with HCL Comnet, with Pricing Buffers.

I suggest we ask Sam, Since He may be importing the JBL Components in USD and make conversion payments..Maybe he can throw some light on how the system works.

Last edited by wolfinstein : 17th May 2007 at 23:43.
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Old 17th May 2007, 23:45   #111
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wolf, companies indeed do not shut down. Companies adapt, but such sudden changes has shaken up things. In such light there is a strong drive to preserve costs, and its salaries which are the first casualty.
So while the industry would be taking a 20% hike, such a company may hand out only 12% average hike.
This is called adapting. Drastic measures. If rupee had appreciated slowly it can get factored in, but in case of foreign VC funded companies with all clients international, and software catalogue prices in dollars, it hits the bottom line.
Slowly adaptation will come and it will be factored in, but sudden hits mess up things.
As Samurai said stability or gradual thing is good, but sudden changes either way make a few people very happy and a few people very worried.
This sudden change has made us very worried
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Old 17th May 2007, 23:48   #112
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Hmm, I guess I'm seeing the point here...! But Its not too steep a change yet, If all goes well, the Balance will be made..! My point here is that companies do generally make Buffer provisions to handle these instances and situations till some level at least.
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Old 18th May 2007, 01:19   #113
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Actually some big companies are also taking hit wolfi... albeit at a lower level, inspite of all those buffers built in, extreme clauses, hedging and what not it still has caused concern.

Some of the bigger companies have lowered their guidance and stock market has not taken very kindly to it. Also, taking shelter under hedging and related means can also be done only upto an extent. However corporates whose almost entire earning is in $$ and have billion dollar turnovers do get affected when the fall is so steep. These companies can not all of a sudden open renegotiation with hundreds of clients just like that. Normally rate negotiations are annual affairs.

Take a simple case. I run a ODC for a Fortune client. My onsite billing rates are say some $55 an hour. Typically I earn about $9200 a month from each resource posted at the client's location. Now going by the salary trends this guy is paid some $5500 a month. That leaves me some $3700 per head. Add to this the fixed expenses like administrative costs, local costs like insurance premium etc I am left with probably $3000 per head. If you take other expenses like leave entitlement of roughly 2 days per month, visa costs, flight tickets, courtesy stay of 7 days to 15 days (which of course gets amortized to an extent if the resource works for a long time there) I earn some $1700 net per head. Now if all of a sudden rupee appreciates by such a huge margin (15%) imagine the havoc it can wreck to my topline. Now imagine a company that starts loosing at this rate for some 20000+ associates on overseas assignment and rest at a little lesser rate for offshore associates. That is where the angst lies. The pace of things when the changes get too fast sometimes become unmanageable. Even a big company starts gulping.
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Old 18th May 2007, 02:55   #114
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Do all you guys vote?
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Old 18th May 2007, 07:53   #115
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Sorry to say this .. But whats gonna happen if the govt removes the tax holiday given to all these IT companies?

I am sure they will collectively pass this cost to the employees in terms of reduced/static salary.

Also, Samurai..Have you tried to diversify to non US and local clients?
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Old 18th May 2007, 08:37   #116
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Quote:
Originally Posted by wolfinstein
Hmm, I guess I'm seeing the point here...! But Its not too steep a change yet, If all goes well, the Balance will be made..! My point here is that companies do generally make Buffer provisions to handle these instances and situations till some level at least.
The rupee has been generally stable in the past few years, either losing or gain 1-2 points every year. Therefore, forex variation was generally not given much importance among small time operators like us. Even protection has it's cost. When the risk perceived is minimal, not much protection is bought. These are the times one regrets it.

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Do all you guys vote?
Why should that matter? We are not asking government to interfere. This is not a cry for help, we are just describing the effects of drastic forex variations.

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Sorry to say this .. But whats gonna happen if the govt removes the tax holiday given to all these IT companies? I am sure they will collectively pass this cost to the employees in terms of reduced/static salary.
I wish they do, I don't enjoy tax holiday even now since I am not 100% EOU.

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Also, Samurai..Have you tried to diversify to non US and local clients?
Not economically viable, not with the kind of salaries we need to pay IT people.
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Old 18th May 2007, 16:40   #117
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Why should that matter? We are not asking government to interfere. This is not a cry for help, we are just describing the effects of drastic forex variations.
It matters because I heard some criticism of the Indian govt and how it kowtows to nefarious and selfish IT/VITY people and sells out the larger interests of the common people.
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Old 18th May 2007, 20:09   #118
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Indian Govt has to get out of the habit of catering to lobbies. Including the software IT/VITY lobby. Because the numbers involved in these lobbies are very small, however significant, but the entire nation has to pay a price for this catering. Also lobby 'leaders' might also change their loyalties to other countries. Something the general public doesn't have the luxury of.
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Old 19th May 2007, 02:41   #119
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Indian Govt has to get out of the habit of catering to lobbies. Including the software IT/VITY lobby. Because the numbers involved in these lobbies are very small, however significant, but the entire nation has to pay a price for this catering. Also lobby 'leaders' might also change their loyalties to other countries. Something the general public doesn't have the luxury of.
I can never understand that if a sector does not bring in any value growth to the country, there is talk of putting money, sops blah blah.
But whenever a sector or industry does well, there is lot of hue and cry and talk of "reigning in" as if doing well and being prosperous is a crime.

I was once listening to a very very rich businessman on TV. I won't mention his name because there is risk of flame wars erupting here, but he said something very very true.

He said something like this"Though the mindset is slowly changing, we Indians are apologetic of wealth. Its like its a crime to be rich. " At that time I felt its soo right. I don't know where this came from, but even if you do well by your own accord, without cheating anyone etc., still the public sentiment is that you have done a crime by doing good, by prospering, and you should be punished.

I can vouch for it that if the IT sector goes downhill, and grows stagnent, and does very bad, and instead of earning forex, becomes a drain, there will be talk of tax benefits etc., etc., but if it does well then the lynch mob gathers.

Once a post was made in the Official joke thread about 4 men and their beer. Its so relevant now.

I also fail to understand what price is the country paying. Of course if you count pollution and growing traffic jams, but then when incomes increase these problems will happen.
Apart from this urban chaos, the country's fiscal situation is much better than the license raj era, and the countries forex reserves and cash flow is better.

Before people say IT sector gets a lot of tax breaks etc., let me tell you its not the only one. Exporters never have to pay tax, but a software company employee whose company exports all the code has to pay tax.
Many states from past few years have been giving 0 tax sop to companies, a notable beneficiary being Honda in UP.

But its just that tax sops to IT sector etc., are highlighted. Nothing special as such is being done for IT/VITY sector. Before IT became big, and even now many other industries get equal benefits

Last edited by tsk1979 : 19th May 2007 at 02:45.
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Old 19th May 2007, 04:08   #120
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The difference is, IT was built on the common man's shoulders. Unlike most exporters, knowledge-based industries rely on their workforce to bring home the bounty. No fancy machines, no raw material, nothing. Which in turn means their employees share in their profits, which are on an international scale. Which in turn leads to more visible wealth among hitherto middle-class people. Which creates resentment among non-IT people.

I've personally heard these sort of comments go around before. IT/VITY guys, corporates, jet-set, the whole lot always get lambasted. It's funny no one ever shakes a fist at the Ambanis or the Bajajs or anyone else. Just your poor middle-class IT guy who works 10 hours a day and pays his taxes in full.
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