COVID-19 impact | WFH results in cost savings of just 1% for IT companies
Assuming that nearly half of all employees working in the IT sector are working from home, the net cost savings yielded for IT companies stood at just about 1 percent after adjusting for additional cost incurred for setting up the home infrastructure, a report by Knight Frank India has said. For large IT companies that have their own premises/campus developments, the cost savings by moving to WFH will be even lesser, the report added. The study was based on financial statements of the 119 listed IT companies, representing 37 percent of the industry's operating income and 28 percent of the employee base.
The Indian IT industry spends about 4.3 percent of its operating income annually on real estate costs. Smaller IT companies spend 4.7 percent on real estate, followed by large IT companies at 4.4 percent, and mid-size IT companies at 3.6 percent. Overall, office space rent constitutes 0.5 percent to 2 percent, while the rest is the cost incurred towards operating these facilities, the report titled Work From Home (WFH) and the impact on Corporate Real Estate said.
“While the savings on real estate operations expenses are marginal, these cost savings have to be measured against qualitative aspects of the business such as the lack of control, retention and attraction of talent, competitive edge, data security,” said Shishir Baijal, chairman and managing director, Knight Frank India. “The research conducted by Knight Frank indicates that with WFH, the savings on Real Estate Operating Expenditure as percentage of operating income for IT companies is low. After we take into account the additional expenditure borne for setting up home infrastructure, the savings reduce further. Moreover, for large IT companies that have their own premises/ campus development the cost savings by moving to WFH will be even lesser,” said Rajani Sinha, chief economist and national director – research, Knight Frank India. “WFH was required at the current juncture due to the Covid-19 pandemic, and hence most companies moved to this arrangement. However, there are concerns related to productivity, employee motivation, lack of adequate home infrastructure,” she said.
The survey also pointed out that 90 percent of respondents miss their office environment while working from home. In the share of employees who miss their workplace, NCR (98 percent) leads the table, followed by Mumbai (94 percent), Bengaluru (91 percent), Chennai (90 percent), Pune (88 percent) and Hyderabad with 81 percent. The COVID-19 enforced WFH has also adversely impacted the productivity and performance of the employees. About 30 percent of employees have expressed deterioration in their productivity and work performance while working from home.
Considering the significance of 4.1 million IT sector employees and their influence in decision making, Knight Frank India conducted an extensive survey with 1,600 employees of Information Technology (IT) and Information Technology enabled Services (ITeS) companies in India to understand their proclivity towards WFH. The survey cited that 60 percent of respondents believed time saved due to no office travel, and 58 percent highlighted savings due to no cost of travel, as advantages for WFH. Whereas, in terms of disadvantages, 43 percent felt a lack of office-driven social life and 42 percent cited difficulty to focus in an informal setting.