The Hindu Business Line : Rise in salaries will continue, say cos

Pune, Dec. 31 India has always been touted as a low-cost destination for any of the software work to be carried out. But there seems to be a ripple in the industry and with many companies sharing their worries about the escalating cost, be it salaries or otherwise.

Rise in salaries has continued unabated in 2007 and companies have indicated that it would only continue, if not at 12-15 per cent annually, then at least at 10-12 per cent. And the consensus is that salary rises are a worry and if companies do not innovate and improve productivity, the twain shall meet in terms of cost and price at some point and erode profitability, says Mr Ganesh Natarajan, Deputy Chairman and Managing Director, Zensar Technologies.

Mr Arvind Thakur, Chief Executive Officer, NIIT Technologies, says that initial reports, market indicators and the appreciation of the rupee could put some pressure in the compensation packages in the coming year but it is still awaiting further reports for any intimation on it. Compensation would be skill-based and domain specific and there would be a premium paid for special skill sets. “Rise in salaries would continue, there is no doubt about that – by what percentage is something we will decide depending on the demand and the need,” is how he sees it.

However, Mr S.G. Raja Sekharan, Sr. Vice President, Kaene, points out that only the companies which have believed in giving salary hikes every year would need to reconsider their policy in the coming year.

With this little worry in the minds, what would be the outlook for 2008? Mr Arvind pointed out that the US dollar weakness would persist into the next year as the US domestic economic woes keep it under pressure. Further the robust Indian economy would attract more global capital sustaining the growth and making the rupee stronger.

“Infrastructure bottlenecks are currently the biggest constraint to growth and with demand for talent growing stronger in the broad economy finding manpower of needed quality is likely to be the next biggest constraint. Need for an education policy to make the masses employable is our next big challenge,” he says.

“One has to constantly re-invent in order to survive in today’s business environment. Whether this means thinning down in order to operate as a niche player in just one vertical or establishing oneself as a purveyor of quality software products for an industry group, flexibility and the ability to adapt one’s fundamental business strategy based on environmental conditions is key,” he points out.

Mr Chandrashekharan, however, says that despite the uncertainty in the market about the economic outlook for 2008, 92 per cent of our clients do not expect their overall IT budgets to decline going into 2008.

Outsourcing budget

Outsourcing budget growth is expected to outpace overall IT budget growth in 2008, with 90 per cent of respondents citing continued growth in offshore development spending. Finally, amongst the financial services customers that completed the survey, about 90 per cent did not expect their IT outsourcing budgets to decline in 2008.

According to Mr Kris Gopalakrishnan, Chief Executive Officer and Managing Director, Infosys Technologies, the software industry would witness the emergence of new technologies that would address issues around the carbon footprint of global corporations. There would be a business opportunity for IT companies to introduce innovative technology solutions that would allow businesses to make investments in low carbon or energy efficient technologies that would make running cost equal to or lower than the existing infrastructure.

He also points out that another trend that held promise is the convergence of mobile, Web and the real world.