Rumors about Indian IT staff costs rising are being given more credence by the local media, with reports that IT staff costs are booming and pressuring the profit margins of offshore players.
India’s Business Line has reported that due to fierce competition for skilled labor from US-based rivals such as EDS, Accenture, and Cap Gemini Ernst & Young, Indian firms are paying higher salaries to attract and retain local talent. The paper goes on to say that Indian firms have increased the frequency of staff appraisals to every 12 months, from 18 months, in an attempt to retain good staff.
These claims certainly support ongoing industry rumors that the Indian labor market is not the bottomless well of talent that many companies have led clients to believe. Recently, a number of technology consultants have questioned the true extent of the country’s skills base.
One consultant interviewed by the UK’s Channel 4 news said that many Indian offshore companies, particularly in the business process-outsourcing sector, could no longer attract graduates, and instead settle for those who can speak English and can use a computer. Other criticisms focus on the monotonous work that Indian staff are expected to do, and the morale-reducing practice of giving each employee a western name. Staff turnover in Indian call centers is about 50%.
Unfortunately, hard evidence of this trend is not easy to find, and most Indian companies, mindful of their value-add will only admit to feeling some pressure on margins through small staff costs. Even the research published by the Business Line and used to support its claims, does not add up.
The paper compares total staff growth for a selection of prominent Indian IT companies with the growth in their staff costs. Unfortunately, apart from comparing different financial periods, the research actually implies that labor costs are falling, as staff growth at Indian firms has outpaced the growth of staff costs. This either indicates that costs have not risen significantly, or that these companies are not hiring the type of staff that has been affected by the rumored salary rises.
This article is based on material originally produced by ComputerWire.