India Tech Profits Up 30% But Squeeze Coming

[OhioChick]

Indian outsourcing companies, though, are expected to have to increase high-tech salaries to keep workers from straying.

By Reuters
InformationWeek
Oct 9, 2006 05:12 PM

BANGALORE, Oct 9 - India's booming software services companies are set to report their quarterly earnings rose by about a third from a year ago as western clients come under increasing pressure to trim costs to remain competitive.

But some could see margins squeezed as they fork out higher salary increases to keep ambitious employees from straying to more recent market entrants such as IBM

A Reuters poll of 14 analysts showed firms should post 27-40 percent profit growth for July-September, while i-flex solutions ltd., in which Oracle Corp. holds a majority stake, would show a seven-fold jump.

"We are expecting over 30 percent topline and bottomline growth for all the top tier companies. Overall, we are talking about strong growth in the quarter," said Tejas Doshi, an IT analyst with Sushil Finance in Mumbai.

Over half of i-flex's revenue comes from software products, and can see large swings from year to year.

But analysts say the results may not offer much direction for the current December quarter as a possible economic slowdown in the U.S. threatens profits. The U.S. accounts for over 60 percent of top Indian software services firms' revenues.

http://www.informationweek.com/news/showArticle.jhtml?articleID=193105698

[pinkpops]

1. Just wait till they all start getting sued for incompetance...

[OhioChick]

4. A shit storm is brewing.......

Indian call centre security breaches exposed
Web posted at: 10/7/2006 8:17:10

BANGALORE • The security of Indian call centres has come under scrutiny after a British television programme’s investigation into data protection breaches, which industry officials worry could affect new business.

Britain’s Channel 4 said on its Web site that after a 12-month undercover investigation it would show in a programme that criminal networks in India had traded British consumers’ bank account details and other commercial information for huge profits.

“This certainly comes as a jolt. Many deals, which probably are on the table, will see some delays,” Raghu Raman, Chief Executive of information security consulting firm Mahindra Special Services Group, said. “For lobbies who are looking for ammunition against outsourcing, this definitely will be a major thing. The opposition against outsourcing of jobs to other countries will become much stronger.” India’s booming back-office sector — which provides services such as handling customer requests and payroll accounting at a fraction of the costs of the West — reported revenue of $6.3bn in the year to March 31, 2006. In 2006/07, the sector is expected to grow by 27 per cent and generate revenues of $8bn, the National Association of Software and Service Companies (NASSCOM) said in a recent report. But a string of fraud cases has raised concerns about the industry, which employs around 400,000 people.

In June, a worker at a Bangalore call centre of HSBC Holdings was arrested after funds were taken from British bank customers. Media reports said 230,000 pounds ($414,000) was taken in the fraud, which was caught by internal security.

http://www.thepeninsulaqatar.com/Display_news.asp?section=World_News&subsection=India&month=October2006&file=World_News2006100781710.xml

[AngryOldDem]

8. Which anyone should have seen coming

We worry about security risks, but have no problem shipping proprietary code and whatever else overseas to be used at will. Go figure.

[Rockstone]

2. You get what you pay for

[lovuian]

3. Wait till they Strike for higher wages :)

and I will be cheering their workers on

[Megahurtz]

5. Good for them.

:sarcasm:

[ChromeFoundry]

6. A lot like the US economy back in the late 90's...

IT workers job hopped between either in-house positions or consulting companies and got on average, an 11% increase with every hop. There were so many positions to fill that the consultancies could demand $150-$300 bill rates per hours. If you could spell PC, you could get a decent job. This is what is happening in India right now. Cost of living is much lower than living in the US. The talent is immature, but the demand is great for positions to be filled.

The economic balance will be reached when salaries increase to a rate of 1/2 of the current US or UK salary. As their salaries increase, their cost of living will follow. Once a break even point is reached, there will be no point in having the work outsourced to that area anymore.. then you will have the mass layoffs that were realized here back in the 2000-2001 period.

Since corporations are greedy, they will seek out other areas in inferior economic status. The cycle will start over and end with the same result.

Now the problem with this model is that you will always have an inferior product in the end. Rarely can a person with 1-3 years experience in a single discipline compete with the quality, security, scalability and re-usability of someone more seasoned with over a decade of experience in multiple languages and platforms.

Would you want to drive a car at 65 mph, with your kid in the back seat, built by someone that never built a car before.. but kinda knows how they work!? And this was the first car they ever built! And they will do it for much less than that guy that has built hundreds of successful cars....

Now, if you were a business owner.. Would you want the software that runs your business written by 5-10 someones with experience... or would you rather have 30-40 inexperienced people building your software and have the project team going through unwieldy turnover rates... because competing projects pay more?

So many people wonder why there is so much identity theft from companies... Would you trust a new college grad to build the lock on your front door of your house, because he took a class on how to make a lock? Or do you think you would go with a solution that was a little more proven? Software has locks. Software is a business vehicle.

[OhioChick]

7. Great analysis! n/t