Now Indian firms are facing some of the skill shortage pain their developed economy customers have suffered for years.
Financial services firm Dun & Bradstreet has issued a report profiling 184 of India’s top technology companies, finding their biggest challenge to continued growth will be the availability of skilled human resources.
Wages growth is expected to become a major challenge for the industry in India, just as it is already a challenge in developed economies.
The Indian IT industry last year generated about US$47.8 billion (A$58.6 billion) in revenue and is expected to grow to US$90 billion (A$110.5 billion) by 2010.
The D&B report, titled “India’s Top IT Companies 2007” found most Indian tech firms reported employee costs of between 35 per cent and 45 per cent of revenues.
Because employee costs represented such a large portion of revenue, any significant rise in those costs would put strong pressure on margins, the report found.
A growing gap between skills supply and demand, high attrition and turnover rates and the fast increasing participation of global companies in the Indian domestic market were all factors affecting IT skills costs.
“Under these circumstances, managing the employee cost will remain a key challenge for Indian IT industry. It is believed that Indian IT firms will continue to face an average wage inflation of 10-20 per cent annually at various levels,” the report says.
The Indian tech industry’s contribution to the country’s GDP had grown from 1.2 per cent in 1999-2000 to 4.8 per cent in the 2006 financial year, and would break through five per cent this year, Dun & Bradstreet India chief executive Manoj Vaish said.
“The Indian IT Industry has emerged as the flagship of Brand India across the world, and continues to grow at a rapid pace,” Mr Vaish said.
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