India's Information Technology sector has boomed for more than a decade on the back of a cheap and plentiful supply of a skilled labor. But Indian IT companies have begun establishing new facilities overseas as they grapple with rising salaries and a shortage of skilled personnel at home. Anjana Pasricha has this report from New Delhi.
Several of India's biggest Information Technology companies announced this month the opening of new development facilities from East Asia to Latin America. Wipro Technologies is opening a new center in Mexico, and Satyam hired 300 engineers to man an office in Malaysia. Infosys Technologies recently established a center in the Czech Republic.
These facilities are being opened in a bid to counteract the rising costs of doing business at home. India's technology boom began in the 1990's. Western firms out-sourced work to India, where skilled engineers worked for a fraction of the salaries paid in Europe or the United States. But a decade later, the situation is changing. Wages in India have surged along with the country's economy.
The sharpest rise has come in the information technology, or IT sector: according to a recent survey, wages of software professionals rose by nearly 20 per cent in 2007.
Moreover, companies are battling massive attrition, with competitors constantly luring away talent. On top of that, the rupee has risen by nearly 10 per cent this year against the dollar, trimming the profits of firms that do much of their selling abroad.
Partha Iyengar, research director at consultancy firm Gartner in India, says the IT industry is scouting for lower-cost locations outside India.
"We are currently tracking about 53-plus countries," he said. "The Indian providers [companies] are actually moving into these countries recognizing that all of these countries do have an additional skills base that would be worth their while to try and leverage."
IT companies say many of these countries offer cost advantages in both wages and general expenses. A further advantage is provided by using these centers to service clients in the vicinity. Centers in Mexico, for example, will deal with American customers, and those in Hungary and the Czech Republic will be used for Western European clients.
An industry group called Nasscom (the National Association of Software and Service Companies), which represents software companies, has predicted that the sector will face a shortfall of more than half a million workers in India by 2010.
The shortage has been created by the needs of an industry that is expanding at a furious pace. The sector is expected to generate $50 billion in revenue this year, more than double of the $20 billion it earned three years ago.