Following up on the series, here is trend 1:

Increasing costs in India

Close to 50% of cost of most Indian IT Services companies are their people, talent cost have been on the raise for some time now. While India has a large pool of trained / trainable resources, recruiting the requisite number of persons with desired skills at the right time may not be easy. The demand for specific skilled IT personnel may outpace supply, leading to an increase in salary levels which might wipe away the cost arbitrage, the whole premise on which the Indian IT Services industry was built.

Indian IT Services firms are facing a double wammy increased costs due to wage inflation which is due to the intense competition for skilled human resources as well as pricing pressures due to heightened competition from global and Indian IT companies.

Indian IT Services Companies seem to be tackling it with a three pronged approach, we will need to wait and see how successful they are:

Variable Compensation: A fair amount of compensation based is being based on organizational performance and business performance, in some of the senior levels, close to 50% of their compensation is tied to how the larger organization performs.

Improve work life balance: Companies realise that money alone is not going to be something that is going to influence people to stay back. And hence they are looking at some of the other aspects which include providing experiential opportunities, work from home options, bring in family for some of the organizational activities and so on.This is expected to add a sense of belongingness.

Manage the Pyramid: This is of course an Lever that is available to the firms which helps reduce the average cost of delivery. Before it was only 30% rookie's/freshers now its almost at 50% rookies/fresheres. In a recent outsourcing guide by the CIO site on India: Average Entry Level Programmer Salary (2yrs) = $5K - $10K - Which is still very cost effective.So this continues to be a key lever, but some understanding will be required if there will be any impact on quality and also the kind of work that these rookies can be leveraged for....production support of course, value delivery???

First part of the series is available here.

Prashanth Rai