Posted on 07/04/2007 7:48:01 AM PDT by TigerLikesRooster
Rising wages prompt firm to pull out of India Image search firm Riya will consolidate operations in the U.S.
By Tash Shifrin, Computerworld UK
July 02, 2007
Image search firm Riya is to pull its research and engineering operations out of India to consolidate in the U.S. due to rising wages in Bangalore.
The company, which is behind visual shopping Web site Like.com and specializes in image recognition software, had maintained offices in both Bangalore and the U.S. despite the difficulties of being based in locations 12 time zones apart because low wages and a strong pool of talent in India meant the company still saw a significant return on investment.
But in his company blog, Riya chief executive Munjal Shah, said: "Bangalore wages have just been growing like crazy. To give you an example, there is an employee of ours who took the first five years of his career to get from 1 percent to 10 percent of his equivalent U.S. counterpart.
"He then jumped from 10 percent to 20 percent of his U.S. counterpart in the next 1 year. During his time with us (less than two years) he jumped to 55 percent of the U.S. wage. In the next few months we would have had to move him to 75 percent just to 'keep him at market.'"
Shah added: "In general this wage inflation is really good for my employees and great for India."
But the increase in Bangalore wages had "destroyed the ROI" that was the rationale for maintaining the otherwise difficult two-continent operation. The company has now moved to consolidate its engineering and research work at its California headquarters.
In his blog Shah predicted that other firms with similar offshore operations would also face problems as wages rose. "I do believe that other startups in Bangalore will see the same issue in 12-24 months," he said.
Shah noted that unlike Silicon Valley employees, staff in Bangalore did not value stock options highly, preferring a boost in cash wages. This, and the fact that Riya was seeking the most highly qualified staff in the area "increased our exposure to wage inflation", Shah said.
The costs of having two offices so far apart was "significant", he said, with staff having to make late-night conference calls and then returning to work late the next day because of tiredness.
"We were all travelling constantly. Development and communication moved slower due to the distance and teams. However, all of this was worth it so long as the ROI was there," he said.
But loss of that return had prompted the U.S. consolidation. Riya would see a fall in headcount in a bid to keep overall payroll costs the same before and after the move, Shah said. "Because wages are still higher in the U.S. we couldn't bring everyone."
So now they're bound for China, yes?
I had read some time before that along with manufacturing, China ways making headway as an outsource destination for service/tech related industries.
It wouldn't surprise me to see it go to China rather than coming back home, as much as I'd like that.
More than that, I suspect this whole thing is just a cover to cool down the recent H1-B violation issues.
http://www.pcworld.com/article/id,133655-pg,1/article.html
India’s Software, Services Exports Forecast at $40 Billion
The strong growth in exports is due to improvement in India’s competitiveness and the addition of new services.
John Ribeiro, IDG News Service
Monday, July 02, 2007 6:00 AM PDT
India’s business providing software and services to companies outside its borders will grow a healthy 26 to 29 percent this year, the country’s main trade association for that sector said Monday.
Revenue from exports of software, services and business process outsourcing (BPO) will reach about US$40 billion for the fiscal year that ends next March 31, according to data released Monday by the National Association of Software and Services Company (NASSCOM).
Export revenue from these sectors grew 33 percent to $31.3 billion in the fiscal year to March 31, according to data released by the trade body.
The strong growth in software and services exports is coming from an improvement in India’s competitiveness, and the addition of new services, such as remote infrastructure management, by Indian service providers, Kiran Karnik, president of NASSCOM told reporters in Bangalore on Monday.
The revenue figure also includes exports to their parent companies and clients by Indian subsidiaries of multinational companies such as IBM Corp., Oracle Corp., and Accenture Ltd., that are expanding fast in India.
India’s overall IT industry grew by 30.7 percent in the year to March 31 to earn revenue of $39.6 billion, with the domestic market also growing by 22 percent to $8.2 billion, NASSCOM said. Many multinational companies including Hewlett-Packard Co. and IBM have bagged outsourcing contracts from Indian companies.
The Indian IT industry employed about 1.6 million staff as of March 31, besides about 6 million indirect staff employed in supporting the large offshore software development and BPO operations in India, Karnik said.
About 1.2 million people are employed in developing software and running back office processes and call centers for customers abroad. The U.S. continues to be the largest market for Indian exports, accounting for 66 percent of revenue, Karnik said.
India’s IT industry is facing high staff attrition and salary increases, but that will not slow down growth, Karnik said. In the short term, NASSCOM, of Delhi, is helping set up finishing schools that will make more Indian graduates employable by the IT and the BPO industry, he said. In the long-term, though, NASSCOM is counting on more investments by government and industry in the education sector, he added.
The IT industry in India is also grappling with the strengthening of the Indian Rupee against the US dollar, which pushes down realization in Rupees of revenue earned abroad by Indian companies.
In the year to March 31, exports of IT services grew by 35.5 percent to $18 billion, while exports of BPO services grew 33.5 percent to $8.4 billion. Revenue from exports of engineering services, a classification that deals with non-electronic design services, grew by 23 percent to $4.9 billion.
But loss of that return had prompted the U.S. consolidation. Riya would see a fall in headcount in a bid to keep overall payroll costs the same before and after the move, Shah said. “Because wages are still higher in the U.S. we couldn’t bring everyone.”>>>>>>>>>>>>>>
Does he mean that the Indian workers are being brought into the US rather then hiring from here?
Arent we tired of this obsessive fixation on IT ? Even guys from Aerospace Engineering at IITs are degrading themselves by becoming software engineers.
IT jobs pay well, but unless you develop other sectors country will suffer. The promised revolution in Biotech and EE hasnt come yet, as expected, thanks to this common trend to join lucrative software jobs.
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