India upbeat about grappling with labor crunch

IDG News Service - As business booms for Indian IT outsourcing service providers, hiring and retaining software engineers at salaries considered reasonable in that country has become difficult. Despite the staff crunch, however, multinational companies are still setting up or expanding software development facilities in the country or outsourcing to Indian software service providers.
In the face of a looming labor crunch, multinational and Indian companies have used a variety of tactics to help ensure the delivery of high-quality services that are still well below U.S. and Western European costs.
If a business is looking for a combination of relatively low-cost, high-quality staff and a large pool of talented people, then India is still the best location, said Chinnikrishna Kommi, managing director of Trilogy E-Business Software India Pvt., the Bangalore, India-based software development subsidiary of Trilogy Software Inc. in Austin.
However, large multinational technology services companies like Accenture Ltd., Electronic Data Systems Corp. and IBM Global Services are hiring staff by the thousands in India and are being blamed by Indian service providers for pushing up salaries.
These big companies "are willing to give 30% to 40% hikes in salaries," said Laxman Badiga, chief executive for staffing at Wipro Ltd., one of India's largest IT services companies.
Salaries of junior management and software professionals in the IT services industry in India will grow by 16.3% this year, compared with an increase of 15.3% last year, according to Aditya Kohli, an associate at Hewitt Associates (India) Pvt., the Indian subsidiary of U.S.-based human resources outsourcing and consulting firm Hewitt Associates LLC. Salaries of senior management will grow by around 11.8% over last year.
Staff turnover rates are also going up across the industry, reaching 12% to 15% per year at Wipro, according to Badiga.

While large Indian outsourcing companies and multinationals with strong brand names won't face much difficulty in hiring and retaining staff, smaller Indian companies are likely to be hit, according to Ravindra Datar, principal analyst for IT services and business process outsourcing at Mumbai, India-based Gartner India Research and Advisory Services Pvt.
However, the overall climate for hiring IT professionals could become even more difficult. India's IT services exports are forecast to grow to $28 billion by 2009, up from $7.5 billion in 2003, according to a joint study by KPMG Advisory Services Pvt. and the Delhi, India-based National Association of Software and Service Companies (Nasscom). But by 2009, India's IT manpower resources could fall short by 235,000 of the 1.12 million staff required both for IT services exports and domestic IT