Indian Outsourcers Cash in As Big Firms Cut Costs

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India's top three outsourcing companies are ramping up hiring and increasing pay as global corporations, mainly from the US, send more work offshore to cut costs as they emerge from the downturn.
Tata Consultancy Services,[link widoczny dla zalogowanych], Infosys, and Wipro expanded their global workforces by an average of 5.1 percent last quarter, together adding 16,701 employees, company documents show - an early sign that the Great Recession may ultimately benefit India as cost-conscious companies outsource more work, just as they did after the dot-com bust.
"Our expectations are for flat to marginally stronger IT budgets with a greater share of offshore spend," Wipro Chairman Azim Premji said. "Our customers remain focused on cost reduction."
The employment revival in India's outsourcing sector, which counts on the US for about 60 percent of global sales, comes as unemployment in the US stagnates around 10 percent - near a 26-year high. Inflation-adjusted wages in the US last year fell 1.6 percent, the biggest decline since 1990.
"When there is a downturn the compulsion to control costs increases," said Dipen Shah, an analyst at Mumbai's Kotak Securities. "The demand for offshoring will increase. That will play to the advantage of Indian IT companies."
He argues that the cost savings from offshoring has helped US companies survive - and that's good for the American worker.
"You might say jobs in the US are getting displaced by jobs in India,[link widoczny dla zalogowanych], but because of the value provided by Indian companies and lower costs, there are firms who are able to keep their heads above water and continue to employ their existing employees," he said.
TCS, Infosys and Wipro, whose clients include leading companies like Goldman Sachs and General Electric as well as US government agencies, can do everything from call center management and claims processing to software development and consulting. All three reported stronger than expected results for the December quarter,[link widoczny dla zalogowanych], with revenue and volume growth, signaling that the cost-cutting imperative of this last,[link widoczny dla zalogowanych], lean year may be over for India's $60 billion software services industry.
After about a year of hiring slowdowns, all three companies are sweetening compensation as the fight to hold on to talented employees in India heats up.
Infosys offered its Indian employees an average 8 percent pay hike in October, their first raise since April 2008,[link widoczny dla zalogowanych], and executives said last week they are considering another raise to combat rising attrition.
"The market is heating up and we want to retain talent," human resources director Mohandas Pai told reporters.
Infosys last week raised its gross hiring target for the second time this fiscal year, to 24,000 people.
Wipro executives said they plan to offer staffers a raise in February.
Tata Consultancy Services has paid out 150 percent of performance-linked pay - which normally amounts to 20 to 45 percent of compensation - for the last two quarters, and executives say they will raise salaries next quarter, after a year-long wage freeze.
As demand for workers revives, employers have begun to worry about rising staff turnover. Employees who sat tight during the downturn have started to shop around for better jobs and better salaries.