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-Jayan CM
The domestic BPO firms have strategized many ways to counter the annual rise in wage, which stands at 12-15 percent.
As a part of this strategy companies have started hiring fresh students with non-engineering backgrounds, companies are then moving their facilities out from metro cities to tier-II and III cities, to cope with increasing overheads including rising salaries.
Wages in Indian IT sector has grown tremendously over the year. The increase in salary has started taking its toll on the Outsourcing firm, where they have to shed 70-75 percent of their margin.
In fact, analysts and industry players believe that with these proposed strategies, the IT-BPO firms should be able to maintain their competitive edge in outsourcing for the next 10-12 years
Wages are not only on the rise in India, but also across other offshore locations like China, Philippines, and Romania. Despite higher wage inflation in low-cost nations, on the economic front this would still be considered lower due to the low-base wages in such countries.
Although there is an increase in wages at around 12-15 percent a year, but it is quite unlikely that the same rate will be sustainable in the coming years. Another factor attached to this hike, that will go in favor of India is that 'if the hike continues, India still has the cost advantage for 15 years over US and the UK, since their wages increases at a rate of 4 percent.
Secondly, only the middle and high-level employees enjoy wage increase and not the entry level. So it is these entry-level candidates who form the major of the IT and BPO work and hence the impact on firms becomes less than the above said 15 percent.
Wage increase is not a new event; the industry has been experiencing this crisis for quite sometime now. So to counter this crisis companies can look to make larger use of fresher talent and hire alternative talent pool from non-engineering backgrounds, including talent from smaller cities. Its already happening.
Besides companies are also doing business by mixing end-to-end players and also using a lot of tools to improve productivity.
Though most industry players welcome this strategy, but on the other side experts have advised companies to be cautious and not get carried away. If the industry is not able to keep a check on the rising wage inflation through better productivity gains, the brunt will be significant.
Moving to smaller cities also reduces infrastructure cost. But some companies believe the other way for example "Infosys, feels that moving to smaller cities is not the answer to erase the effect of wage inflation since Infosys pays similar salaries to all employees across India,"
While on the other hand Wipro says: "To address wage inflation one has to start using better tools and technique with less amount of people and ensure we deliver quality work in shorter period of time.
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