by Daniel Ball, Marketing Director, Wax Digital
10. January 2008 21:27
According to a recent article in the Financial Times, “India’s information technology outsourcing sector is heading for crunch time next year.”
A victim of their own success, and also of “the horrible impact on IT margins of a 12 per cent appreciation of the rupee against the dollar this year”, India's professional classes are beginning to price themselves out of the market on a global low-cost basis.
Gartner Research studies have shown that India accounts for nearly 30% of the global offshore workforce, making it the world’s largest such labour pool. But costs are rising fast, with salaries climbing 15% a year, almost twice the rate in other major offshoring markets such as China and the Philippines.
And how are Indian services firms staying alive and profitable in this environment? Improved Purchasing Practice, that's how. The leading players are maintaining margins by "moving more work onshore and hiring cheaper graduates from disciplines other than engineering. They have also employed hedging."
So the wheel turns full circle – as Western organisations have looked to the East for low-cost sourcing in recent years, creating inflationary pressures that subsequently dim their attraction – so those same practices are brought to bear to try and reign in costs within the now ‘less than low cost’ market!
