I think this is a welcome move from TCS. The IT industry today is facing severe challenges from 4 areas. a. US economy situation b. STPI rules coming to an end on Mar 2009 c. Rising wage costs d. Rupee appreciation against dollars
Given these above factors, it is too difficult to sustain the growth rate going forward. All stakeholders in this business of IT (shareholders, employees, customers, suppliers etc) will be forced to bear the brunt of these challenges. Customers will face renogotiation of billing rates. The shareholders will be forced to revisit the fundamental valuations of the IT companies given the fact that bottomlines will be under severe pressure for the years to come. The suppliers will be squeezed for competitive rates. And the employees will also be affected through some effect on the salary levels. And that is the whole concept of variable pay.
It is good that TCS has led the way in accepting the ground reality and taking decisive action to address the same. I'm sure other IT companies are going to take a leaf out of this book and follow suit with similar moves.
