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Monday, January 30, 2006

Is India Getting Expensive As A Devolopment Base

SAP opines "India is slowly getting expensive" ,and that SAP has decided to hire a certain number there, and then start looking at other locations. Reportedly Kagermann pointed to India's relatively high staff turnover, which is fueling personnel costs & SAP is likely to expand in China and Eastern Europe.
Some called me to know my view how service companies tend to look at this.(Like all other posts, I speak for myself like all other posts here and is not anyway related my employer's views). I had recently written China Resource Scaleup Disappoints India Headquartered Companies!! Recently we covered China no big force in software services and covered the Mckinsey perspective on china's software sector, it will be many years before china poses a threat to its continental rival.We also covered the point of view that its going to be the Indian Headquartered companies all the way in future ruling the IT services market. Financial Times recently wrote, China is far from the promised land for Indian software service giants. For service companies, In particular, there is a lack of suitable local applicants for jobs as project managers and quality control managers. In India, such people, typically with 5 to 12 years experience including stints in the US, are paid premium salaries. Software companies are forced to send project managers from India to Shanghai, raising the operating costs there. A lack of bilingual Chinese IT professionals, for jobs such as team leader, is also holding back expansion. One English and Chinese speaking programmer is required to oversee a team of four local developers who speak only Chinese. Because there is only a small number of bilingual programmers, they can command a salary premium of 30-40 per cent. These labour market deficiencies have not gone unnoticed among customers in the US, which is the biggest market for Indian IT. As I mentioned, China : No Big Force In IT Services,Its India All The Way. But I recognize that SAP could be looking at personnel of different profile – essentially to work as part of SAP’s engineering/testing. SAP is also very big in china – it is the largest enterprise vendor in china and therefore it may make sense for them to stay invested lot more in the mid kingdom. To attribute that expansion may not be in my view entirely correct – most of the Indian engineers would like to be part of a job which would help them travel outside India – most of the western companies – product & service companies included are yet to realign the model to meet this basic aspiration – that’s actually preventing them to scale up in great numbers as against good numbers. In my view, already SAP is big in India, but it may be unfair to name India as expensive compared to china. A recent Mckinsey report found the attrition in china at about 20 percent, compared with an average of 14 percent in the United States(Indian average for IT biggies may be similar), which itself has a very fluid IT labor market. Accenture recently reported that its global attrition level remain at 20%. Look at Oracle's India Plans. I would think that investments in various locations are in general mutually exclusive events, so long as things are not shut down in one location and corresponding rampup happens elsewhere.Also just a thought -lot better things can be accomplished without making press statements!!

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"