SAP CEO: India is getting expensive

Kagermann has eye on China, Eastern Europe

By John Blau

January 30, 2006 12:00 PM ET

IDG News Service - Escalating personnel costs in India -- one of the world's largest markets for offshore software development services -- have prompted business software vendor SAP AG to begin looking elsewhere for low-cost, skilled programmers.
"India is slowly getting expensive," SAP CEO Henning Kagermann said in an interview today in the German edition of the Financial Times. "We have decided to hire a certain number there and then start looking at other locations."
SAP spokesman Frank Hartman confirmed the statements.
Kagermann pointed to India's relatively high staff turnover, which is fueling personnel costs, Hartman said. "Personnel costs are a key factor in the software industry."
Staff turnover in India has increased as SAP competes against other IT powerhouses such as IBM and Microsoft Corp., as well as local Indian IT companies such as Infosys Technologies Ltd. and Wipro Ltd., for qualified staff.
SAP is likely to expand in China and Eastern Europe, according to Kagermann. The reason the German vendor has only limited software development in China is largely because of the country's lack of protection for intellectual property rights, he said. "But that isn't going to prevent us from doing more in China," he added.
Today, about 1,000 people work for SAP in China, mostly in sales and marketing, Kagermann said.
Eastern Europe is another area where the German CEO sees opportunities for offshore software development. Turnover is low, he said, and the costs aren't too high.

Reprinted with permission from

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