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India Aims to Tame Soaring IT Wages

February 6, 2006 12:00 PM ET

Computerworld - The rapid growth of Indian IT firms and strong demand for skilled workers is putting pressure on wages in India. The escalating personnel costs prompted one major software vendor, SAP AG, to start looking elsewhere for programming talent. In an interview with Computerworld, Kiran Karnik, president of India's National Association of Software and Service Companies (Nasscom), spoke about the rising costs and how his group is working to address the problem.
Is demand for Indian workers declining as a result of increasing costs? I wouldn't say so. Costs have been going up, but I think the advantages are so huge that cost is only one of the factors that most companies take into account.

Kiran Karnik, president of India's National Association of Software and Service Companies (Nasscom)
Kiran Karnik, president of India's National Association of Software and Service Companies (Nasscom)
How fast are IT wages increasing in India? At the entry level, it's between 10% and 12% a year. At the middle-management level, it's a little higher, about 15% to 20% [per year] over the last two years. But we see that as a temporary mismatch between demand and supply.
What can be done to address that mismatch? Market forces are naturally beginning to act, and you are getting a lot more people going into areas of high demand like IT [and] computer sciences. Nasscom has taken steps to look at the critical problem. It's not so much the absolute numbers [of available graduates], but the kinds of skill sets that this industry needs. We are looking at improving curriculum [and] teaching. It's really a focus on quality in the short term rather than numbers -- because numbers by themselves are not the constraint.
Aren't those long-term initiatives? How do you solve the immediate problem of double-digit wage increases? I'm speaking of the short-term solution. The short-term fix is to do a six-month bridge course or finishing-school kind of concept. It's not that they lack standards, it's just that the education that they've gone through doesn't quite meet industry needs. What they need is six to eight months of additional work to get them to where you need them. We see that as the short-term fix.
What skills will be taught in these training programs? On the [business process outsourcing] side, communication and teamwork -- things which you would broadly define as "soft skills" [that] are required in this industry but are not part of the core discipline at the university. Many [students] are very good at technology, but in terms of problem definition and looking at an issue in a more holistic way, there are gaps. Second, thereare sometimes gaps [in technology training]. They have the basics strong and well, but you need to do some training on the latest technology.
Is turnover among middle managers causing problems, and how do you deal with that? This is the big issue. We are trying to handle that problem [by looking] for lateral moves from other industries. Very often you need somebody who is a good project leader, someone who is able to handle business problems. Second, we are getting more people who are going here [from other countries] because the work is challenging and exciting.

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