IT labor in India getting more expensive

September 7, 2005

IT wages in India increased by 15.1 percent last year and recent college graduates enjoyed 20.2 percent pay raises, according to a new survey from AMR Research.

Additionally, part of these rising salaries will inevitably be passed on to India's customers abroad, so AMR offers some guidelines as to how to better manage these salary hikes.

Ironically, one of the ways to save money on this trend is to send more work offshore, given that offshore is typically cheaper than onshore.

AMR's Lance Travis recommends 30 percent onsite to 70 percent offshore; hewing to this kind of ratio, especially if you're far from it now, will result in absolute cost savings despite the relative increase in Indian salaries.

Another pointer from Travis is to "negotiate a longer term contract that specifies a fixed number of resources....Longer term contracts also allow the service provider to better manage their employee utilization rates."

Finally, if you skew your offshore investment in the direction of tools versus labor, you can factor out salary increases. Indian companies do a lot of software development, and Travis thinks it may make financial sense to pay more up front for a tool than to remain engaged with labor, which could be more expensive over the long term.

Source: Line 56