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Rising wages and a shortage of skilled workers
threaten to blunt the competitive edge of India’s flagship
$48-billion information technology industry, experts said.
Rivals such as China and the
Philippines are set to challenge India’s dominance, which is also
being eroded by IT employees jumping jobs for higher pay, a rising
rupee and deficient infrastructure such as telecom connectivity,
roads and ports.
“These are issues the industry
has to deal with in a globalized world,” Kaushal Sampat, chief
operating officer of the Indian unit of Dun and Bradstreet, said.
“You can’t look just at the
positives, thump your chest and say you are the champion.”
“For every positive, there’s
a negative,” Sampat, 36, said in an interview in Bangalore,
India’s Silicon Valley.
Dun and Bradstreet, the New
York-listed provider of information on companies worldwide, released
at the weekend its first report on India’s information technology
industry, which has risen in the past decade on the coattails of
software firms such as Infosys Technologies, Wipro, Tata Consultancy
and Satyam.
The appreciation of the rupee,
which rose last week to an 11-year-high against the dollar, employee
turnover rates as high as 25 percent and a shortage of skilled
workers estimated at half a million by 2009 as wages rise 15 percent
a year are the key risks, said the report.
“Limitations in domestic
infrastructure and competition from other global players offering
manpower at low cost like China, Philippines and Vietnam can [also]
have a negative impact on the performance of IT companies,” it
added.
These factors are countering
positives such as worldwide growth in IT spending, which is forecast
to rise at 7.0 percent annually to 2010 to exceed $2 trillion, and
the opening of new markets in Europe.
V.K. Magapu, chief executive of L
and T Infotech, an arm of Indian engineering firm Larsen and Toubro,
said half-a-million people were employed by IT companies when the
industry’s annual turnover was 14 billion dollars, less than a
third of the current level.
IT firms will need an additional
1.6 million software programmers and other engineers to raise
combined revenue to $72 billion in the next five years, Magapu said
at the launch late Friday of the Dun and Bradstreet report.
“The resource crunch will be
truly felt when one large IT multinational comes to India and says I
want to hire 20,000 people in the next six months,” he said.
India’s IT talent pool and wage
costs that at one point were a fifth of those in the US and Europe
have attracted global companies.
IBM has announced it will invest
six billion dollars in India in the next three years, Intel wants to
spend more than $1 billion, Cisco $1.1 billion and Microsoft $1.7
billion.
Typically, 50 percent of the
spending by IT companies, including those in software and related
services, business outsourcing and computer hardware, is on wages.
In the 1990s, Infosys, Wipro and
other Indian IT companies leveraged on their then low labor costs
and plentiful supply of skilled workers to win business from
overseas customers who contribute more than three-quarters of the
industry’s total revenue.
--AFP
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