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IT companies save on office rents to weather slowdown storm

BANGALORE OFFICE SPACE: A rising number of information technology firms are consolidating and re-aligning leased office spaces across the metros, hoping that the saving in rents and operating costs will help them buoy through the global economic storm.

Among the big-ticket lease agreements locked recently is that of Mahindra Satyam. The IT services provider, which operates from multiple locations in Bangalore, has taken up 5,00,000 sq ft of space in the city. Following suit are IT majors such as EMC, Cognizant, Persistent Systems and Nokia-Siemens, all of which have acquired large office spaces to house multiple units under one roof.

While EMC, a provider of storage hardware solutions, has picked up 3.5 million sq ft of office space on the outskirts of Bangalore, Cognizant has taken up 250,000 sq ft . The IT and BPO services firm has also rented three strategic sites to expand operations in Hyderabad. This is in addition to around 7,00,000 sq ft the company had recently taken on lease in Hyderabad.

Earlier, Persistent Systems, a software product development services provider, had taken up 4,70,000 sq ft of space on lease in Pune, while wireless equipment maker Nokia-Siemens rented 8.5 million sq ft in Bangalore..

Real estate and transport of staff constitute about 24% of an IT firm’s total costs. Consolidating offices could translate into a 15-22% saving under this head, according to some analysts. Moreover, housing staff under one roof saves expenditure on energy and housekeeping and maintenance staff.

“Rental forms a large part of the total operational costs and we are looking at maximum utilization of real estate,” says N Venkatraman, CFO of Sonata Softwares, which recently closed its facility in Bangalore’s central business district and moved to Global Village Tech Park. “Even if we can save a rupee on fixed costs, it will directly reflect on our bottom line. All our new headcount addition will be in the new campus.”

Sonata, a technology solutions provider, occupies 1,15,000 sq ft in the Global Village Tech Park. The company also owns a campus in Hyderabad besides the corporate headquarter in Bangalore.

Slowdown in the US and the lingering debt crisis in Europe have put nearly 85% of Indian IT firms’ revenues under a cloud. Experts say the global outlook will determine real estate spends by IT firms in the days ahead.

With an aim to cut infrastructure costs, some software makers are planning to move staff to company-owned property as they realize that owning office spaces works out to be cheaper in the long run.

Among them is Tata Consultancy Services, India’s top software exporter. So far active in taking up leased office space, the company is now buying land parcels across different cities to build its own facility. TCS, which already owns two land parcels of over 50 acres each in Hyderabad, is now in the process of buying 35 acre of SEZ plot in Whitefield, a Bangalore suburb.

Via : ET

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