Feb 19 2007
Indian salary hikes - Myth versus Reality
I cover two points - A recent article highlighting Indian salary hikes and the issue of whether India’s cost advantage in technology is eroding.
Regarding the first, ECA international recently published the results of a survey from 2006 where they found that India, Indonesia, and Russia had the highest salary hikes in the world. Specifically, India had the highest pay hikes of around 12%.
The article notes- “As highlighted recently by ECA’s discussion forums in Hong Kong and Singapore, companies in Asia are becoming increasingly focused on recruiting and retaining welleducated, highly skilled employees in order to maintain the rapid economic growth the region is currently experiencing…”
My observation of the IT industry in Bangalore since 2003 is that this is only partially true. The Indian IT ecosystem covers the entire gamut - from companies that charge about a thousand dollars to GIVE you a job that pays $100 per month, to companies that splendidly compromise and give employees un-ergonomic chairs, terrible lunches, cheap pens and paper pads, to companies that allow you to work from home and cover your transport. There are clearly two kinds of high tech companies in India. One kind has the motto “Throw money at us and we will code just about anything for you with our backs bent and our noses on the ground”. The second kind has the motto “We honor our work and integrity, so please honor yours”.
Moving on to the second past: Is the Indian market overheating because of rising wages?
One recent piece by a global HR firm (reference quoted in a recent Economic Times Brand Equity article) suggests that the Indian cost advantage in global outsourcing of software development will remaiin for about 45 years. The argument is that while at senior and executive levels, wage differences have gone down to 1:3 or even 1:2, the wage differentials at the entry levels remain at about 1:6 and cause the overall Indian IT industry to remain competitive in matters of salary and compensation, even with a 15% salary hike every year. This while a top notch salaried Indian CEO may make about 1 million USD a year, an entry level programmer/designer/analyst still makes only about $10000-$15000. This compares favorably even with salaries in China, Hong Kong, Singapore, Korea and other Asian economies.
My two cents: Global product and services outsourcing will continue on its trajectory for atleast the next several years. Outsourcing has taken on a life on its own, and wage inflation notwithstanding, companies outsourcing software to Bangalore, manufacturing to Beijing, and architecture to Bucharest have no option but to continue building armies of staffers outside of the developed world markets. They also have no option but to continue selling to what a famous politician once called the “great unwashed masses”…
[…] Amit Pande seems to think that the so called salary inflation will have no effect on outsourcing Global product and services outsourcing will continue on its trajectory for atleast the next several years. Outsourcing has taken on a life on its own, and wage inflation notwithstanding, companies outsourcing software to Bangalore, manufacturing to Beijing, and architecture to Bucharest have no option but to continue building armies of staffers outside of the developed world markets. They also have no option but to continue selling to what a famous politician once called the “great unwashed masses”… Linked by Krish […]