Feb 17, 2004

IT majors losing staff to smaller players - The Economic Times

The Economic Times says: IT majors losing staff to smaller players

"MUMBAI: A sharp rise in the demand for employees has resulted in wage bills of leading software companies rising sharply.
Analysts say that Indian companies like Infosys Technologies, Wipro, Satyam Computer, HCL Technologies, among others, are losing experienced staff to new players.

A significant ramp up in operations from global giants like Accenture, IBM Consulting, EDS, among others is slowly affecting Indian vendors as they lose senior and junior level staff .
The implication of such a move is likely to hit the quality of work of Indian vendors, say analysts.
According to a Nasscom Hewitt Total Rewards Survey 2003, the entry level salary (junior software engineer) is up an average 24% to Rs 267,000 from 217,000 in 2002.
The average top management (head of business unit or software development) level salary is up by as high as 58% to Rs 26,70,000 in 2003 from Rs 16,86,000. The middle management level (Project manager) is up 50% to Rs 11,78,000 against Rs 7,84,000 in 2002.
Pratik Kumar, vice president for human resources at Wipro, believes that the rising demand has put pressure on the availability of experienced professionals and in-turn their compensation structure.
"Hike in salaries is not a knee-jerk reaction. Employee salaries remained consistent for two years in a row during the downturn and therefore in the normal course an increase was due anytime last year. An increase in the demand was reason enough for companies to go all out to retain experienced manpower,” Mr Kumar said.

Many say that its not just top rung software companies that are affected by rising wage costs, but even the mid-sized firms have been severely hit.

According to Ravi Ramu, CFO at Mphasis, multinational companies are taking away middle and senior level management.

“This has had an impact on wage costs in the past one year. Indian companies have reacted by increasing existing wage structures. Services such as application lifecycle management, legacy and maintenance have always remained a staple diet for both large and mid-sized firms,” Mr Ramu told ET.

Analyst at brokerage ABN Amro Securities do not see this move positively.

“This clearly has cost implications and also the delivery quality could suffer in the short term in our view. In the long term, scaleability may be impacted due to an ineffective staff mix,” a note by brokerage ABN Amro Securities said.

Higher attrition rates experienced during the first half of the current fiscal is one reason that has led to wage inflation.

Moreover, new services that companies launched during the year did not take off as expected. In some cases, new service offerings have been withdrawn."