Indian IT companies look for low-cost destinations
Indian IT companies look for low-cost destinations
Infosys is looking beyond India to combat higher salaries and increasing attrition rates.

New Delhi: It was not so long ago that the IT companies in United States and Europe viewed India as a 'low cost' destination in terms of technology, services and manpower.

Today, much like their US counterparts, Indian IT companies are looking for low-cost destinations like Malaysia and Philippines to cope with the pressure of increased salaries and lowering earning guidance due to the rising rupee.

"As salary levels are increasing in India and as rupee appreciation is going to impact India significantly we may look for low-cost destinations," Infosys chief executive S Gopalakrishnan was quoted by CNN.

Infosys Chief financial officer V Balakrishnan has said that the company plans to open a development centre in Manila over the next two to three quarters with 150-250 employees.

Infosys Technologies Ltd (NASDAQ:INFY), which lowered its fiscal 2008 outlook earlier Wednesday, said it is looking beyond India to combat higher salaries and increasing attrition rates, particularly in the business process outsourcing sector.

In fact the boom in the IT and IT Enabled Services industry attributed to the massive outsourcing of businesses from foreign lands that started during late 90’s India seems to be reaching a fag end. Some experts are of view that the outsourcing bubble may burst up anytime soon. The cost advantage that India has had for years, is losing ground as the Indian economy is scaling up to new heights and the Indian currency is strengthening.

The gap between US dollar and Indian rupee is getting smaller and smaller. At 40.38 (USD/INR), Indian rupee stands 6.4 per cent stronger as against the previous quarter. The result? Indian IT companies are running for cover. The ones to look out for low-cost destinations now are none other than bellwether firms Infosys, TCS, Wipro and Satyam who are crumbling under the pressure of rising wages and percentage fall on the earnings' graph.

Macquarie Research Equities, in its report on the Indian IT industry, forecast an annual wage inflation of 13 pct in India and 4 pct in the US. India's second largest software exporter, which has 76,000 employees including 7,004 new hires during the first quarter, currently has an attrition rate of 13.7 pct overall and 36.7 pct in its BPO business.

With excerpts from CNN.com

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