At its most basic level, benching becomes evident when the lead-time between recruitment of an individual and his revenue generation capacity goes beyond an acceptable level. But benching is more a symptom than a cause of organisational inadequacy and changes in the market place. This is where the nature of response, on the part of Koshy and his team, has a certain risk: they might get down to address the symptom instead of the cause. This risk is real, particularly because being a NASDAQ-listed company, Delta would be under continuous pressure to improve its results every quarter. Koshy should, therefore, ensure that in addressing the immediate issue of benching, the management does not lose sight of long-term interests.

One of Koshy's first tasks should be to retain existing customers. Evidently, this carries a certain cost because of the proposed cut in billing rates. But it would be far lower than the cost of new customer acquisition. Koshy should not compromise on growth in billings, even if it means reduced margins. The latter must be offset against improvements in productivity and operational efficiency. In fact, the prospects of lower margins should provide the momentum for cost reduction initiatives. When Delta helps its customer reduce its costs, the customer will stay on with Delta.

It makes sense for Delta to move from contracts based on time and material costs to a higher share of fixed fee contracts. Time and material contracts, which normally comprise 80 per cent of billings for a software services firm, provide little incentive for productivity improvements. Fixed fee contracts, on the other hand, offer scope for enhancing margins because all productivity gains accrue to Delta alone, though they carry the risk of unabsorbed cost escalations.

It is important for Delta to acquire domain capabilities in diverse sectors, particularly those which have high-growth potential in future. Healthcare, financial services, telecom, and insurance are some examples. It should also establish appropriate knowledge management systems.

I do not think that moving towards products-based revenue model is a good idea at this stage. The skills and the core competencies required for product development are vastly different from those necessary for software services. There are other risks-large upfront investment outlays, technological obsolescence, long gestation periods, and competing head-on with established players in the business.

However, it would be a good idea to examine the prospects of acquisitions-not of plain vanilla software developers, but of those with deep domain skills and operating in profitable niches. In the ultimate analysis, there are only three ways you deal with benching: enhancing sales (through diversification of markets, services and domain capabilities), improving efficiencies, and cutting costs. The key lies in offering a value proposition, in terms of business benefits that a customer can not refuse.

I suggest a two-pronged approach: a tactical approach to address the immediate problem at hand; and a strategic approach to address any structural changes that need to be implemented. Both must be taken simultaneously.

On the tactical front, Delta could staff in-house turnkey projects with greater than the required numbers of junior developers. The latter could be teamed up with senior business managers, so as not only to effectively utilise the downtime but convert it into training time. This would improve productivity to some extent. But this step must be managed carefully because client quality, timeliness, and deliverables must not be adversely impacted in any way.

Another tactical approach is to identify some emerging technology areas and create small R&D groups of benched staff to understand these technologies and create processes for future implementation in these areas. This would effectively reduce the learning curve in future projects. It would also give Delta an edge in quoting on these jobs, especially in their current mode of anticipation of a greater quantum of offshore projects coming to them.

A third option-a novel approach in the Indian context-is to consider sourcing some of its benched staff to other companies (even potential competitors) that may have a short-term need. This would be considered revolutionary in India, but quite commonplace in markets like the US. Such sub-contracting would help the marketplace in addressing short-term swings in resource requirements across various segments, and help create a more efficient marketplace for it resources.

From a strategic and structural perspective, emerging models of manpower utilisation, specifically ''role based'' resource utilisation (a variation of the activity-based approach being considered at Delta) should be explored. Leading it research groups have projected that this is the future of it staffing environment, where there will not be specific ''titles'' that each employee takes on, but specific time-bound roles, which would change over time, aided by more revolutionary ''just-in-time'' technology-based training methods that are evolving. This role-based resource allocation would allow a more equitable allocation of resources, and the ability to respond to variations in project-based resource requirements.

The worst solution that Delta can adopt in this situation is to consider moving into products as a solution to the prevailing benching problem. A product-related strategy, as opposed to the current services-strategy that Delta is pursuing, is so different that adopting such a fundamental shift in business strategy in response to idle resources is akin to suicide. It could adversely impact the current services business as well through dilution of management bandwidth, diversion of resources into the more resource-intensive areas of product development, as well as the significantly longer ''time to profitability'' in this segment.

The tactical steps advocated above would undoubtedly lead to immediate improvement in margins. The strategic steps could, in the long run, fundamentally alter the financial metrics of the company-in terms of overall staff strength required, revenue per employee, and bench strength required to administer staff projects in the pipeline.

Benching has an analogy with idle time in a manufacturing firm, no doubt. But there are two essential differences. The inventory comprises 'people' who have motivations and aspirations of their own. And while steel sheets and chemicals may lie quietly in warehouses, people will not. They seek to add value to themselves every single day. Of course, scarcity of skills adds its own dimension. I think while benching per se could have a negative connotation, bench-strength does not. A more appropriate analogy would be of a football team where players on the bench are as good as those on the field and the coach could substitute one with the other anytime during the game.

One should analyse the reasons why Delta is facing benching. The company has had a scorching pace of growth over several years. However, in its single-minded pursuit of growth, Delta, like most other companies, might have lost sight of signals from the environment in terms of technology, environment, and the changing profiles of clients' own businesses. It makes sense, therefore, to reduce dependence on a few large clients and broaden the client-base as a safety net. Equally, at a larger level, it makes sense to expand business in markets other than the US, to cushion the impact of a slowdown.

The only way to improve people utilisation factor is to increase billable manpower and improve productivity. Here are some ways by which Koshy can do so.

• Building a core competence that is of significant value to clients, and sub-contracting other work to vendors so that the headcount can be optimised and overheads reduced.

• Taking employees on higher salaries, fixed-tenure contract based employment (as several companies did during the Y2K period) to reduce impact of long-term liabilities.

• Encouraging multi-skilling of employees so that they could be rotated on different kinds of projects and platforms.

• Seeking selective co-operation with affiliate companies or even competitors to ensure better people utilisation.

• Using the interim period to build internal systems aimed at improving productivity, build new products as per the business plan of the company, and train and develop employees for anticipated needs of the future.

• Creating a library of ''components'' for artefacting future software development. Such components are the building blocks in developing software, and reduce the repetitive nature of the tasks and lower manpower requirement.

If benching is foreseen as a short-term phenomenon, then Delta would be well advised to retain people. But if it expects the downturn to last for a long time, Delta will have to make the more difficult decision of asking low-performing employees to look for other options. In fact, this could well be an opportunity to review the overall people capabilities of Delta and weed out non-performers.

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