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 greate