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Rising US wages; outsourcing up

Rising US wages; outsourcing up
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First Published: Thu, Feb 01 2007. 02 36 AM IST
Updated: Thu, Feb 01 2007. 02 36 AM IST
Bangalore: Indian software companies can hope to hike their billing rates in the year ahead after a salary survey of tech workers in the US showed compensation had grown 5.2% in 2006.
The survey, conducted by the US-based Dice Holdings, a recruiting firm, was based on a poll of 20,000 software workers. It puts the average annual salary of an employee in an information technology firm in 2006 at $73,308 (Rs33.7 lakh then) against $69,700 (Rs30.7 lakh then) in 2005. Entry level wages grew fastest at 13.2%, it said.
Indian software service firms that earn about four-fifths of their revenues from customers in the US could benefit because these clients will find it more expensive to hire locally, and outsource more technology and business processing work to low-cost countries such as India, a trend that is already on, analysts said.
“Rise in wages for US-based tech workers is an outcome of a demand-supply gap for technology professionals in that country,” said Siddharth A. Pai, partner at Bangalore-based outsourcing advisory firm TPI.
This is the highest US tech salaries have grown in recent years. In 2005, wages of software workers in the world’s biggest economy grew 2.8% over 2004. And, in 2004, they fell 2.6% over 2003, Dice said in earlier surveys.
Indian software wages are growing at an average 20% annually, double that at junior levels, but the salaries of such professionals remain a fraction of comparable US incomes. Entry level technology workers in India, for instance, are paid up to $6,800 (Rs3 lakh), against the average $42,400 (Rs18.74 lakh) US programmers earned, according to Dice.
Even seasoned specialists in business software—enterprise resource planning (ERP) and customer relationship management—make less. An ERP professional with five to seven years experience in India earned $22,600 (Rs10 lakh) a year, less than a fourth of what a comparable US expert made annually, $96,160 (Rs42.5 lakh).
Large Indian software vendors such as Infosys Technologies are benefiting from the trend of rising tech wages in the US. “If you look at Infosys’ revenue per employee for the last four quarters, it has been growing as the billing rates continue to move up by 2-3% for existing contracts,” S. Gopalakrishnan, the company’s chief operating officer, said.
New contracts this year could see a 4% increase in billing rates, he predicted.
The banking and financial services industry, the biggest consumer of outsourced services, paid the most for tech professionals in the US, an average of $82,504 (Rs36.5 lakh) a year. Silicon Valley again ranked as the highest paying region, with an average salary of $90,310 (Rs41.5 lakh then) in 2006, a 5.7% rise from $85,430 (Rs37.6 lakh then) in 2005, Dice said.
Some of this expansion in billing rates could be dented by the increasing salaries Indian vendors will have to pay foreign staff. Up to a quarter of the tech firms’ workforce is posted close to local offices of clients, making compensation dependent on local wages there.
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First Published: Thu, Feb 01 2007. 02 36 AM IST
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