India will always remain low cost IT service destination

Off late there has been a lot of discussions on increasing cost of Indian resources due to higher rate in salary increase than the western world.  It has been seen that salary increase in IT sector in India has been always on an average of 10% as compared to average 2 to 3 % in US and Europe.

If this trend continues, India may no more remain competitive in Global scenario in next 15 years. Although this seems to be true on the face, we have to check other facts to understand that this situation may not arise. Considering the growth of India and the huge internal consumption, India would require large number of manpower to satisfy internal needs alone.

On the global outsourcing scenario, it is likely that most of the global companies would invest in India to increase their market in the second fastest growing economy of the world. All of this will keep increasing the requirement of both young and experienced work force.

While assuming the salary growth, it is always understood that the same person would remain in the  organization and keep doing the same work and his salary would keep increasing at 10%.  The practical scenario is that Indian companies use the huge manpower of fresh graduates and engineers to fill their majority ranks year after year. This would remain the trend for years to come given the fact that India would remain the youngest country for next fifty years.

Replacement of expensive senior staff with junior low wage staff and using senior expensive staff for expansion and business growth would always keep India as low cost destination for IT services.

It has also been seen that the third party IT service providers normally keep their rates way higher than the actual cost. Captive IT companies who operate in India, even after paying more salaries keep their cost lower than third party IT service providers. The key savings for Captive IT companies is primarily the zero cost of marketing and almost nil bench resources. These two factors alone contribute as high as 25% of the third party service provider’s cost. 

In future, more and more companies opting for their own captives can drive down the cost with similar resources and always remain cost effective in India.

Alok Kumar

Alok Kumar is Managing Partner of SRKay Consulting group, a private equity company, nurturing innovative ventures. Alok also serves on the board of ICCL (Indian Clearing Corporation Limited - A subsidiary of BSE- Bombay Stock Exchange) as an external advisor for technology and information security. Prior to this, Alok had been Managing Director of Sears IT & Management Services India Private Limited (SHI) since its inception in December 2009 and served in the same position till very recently. Having been in senior IT management positions in Fortune 500 companies, Alok has won several national and international awards. Alok is instrumental in planning and setting up SHI and thereafter growing it to a multi-locational thousand-plus people organization. Over the last five years, with his strategic vision, Alok helped SHI grow roots in India, develop and support technology applications and infrastructure across core mainframe, cutting edge e-Commerce and big data technologies. With his unique people-oriented transformational leadership style, Alok turned SHI into one of the most valued investments of Sears, garnering great ROIs, and creating value much beyond cost arbitrage. Under his tutelage, SHI has filed two patents and is recognized widely for its best practices in various areas, the latter, currently featured in Indian Institute of Management (IIM) case studies. SHI also became a CMMI Level 3, PCMM Level 3, and ISO 20000 certified organization. Alok is a widely acclaimed corporate leader in India today. He regularly participates and leads various forums as a keynote speaker and is an author of several books in different genres. Alok has several awards to his credit. He is particularly known in the industry for his people management skills and innovative ideas in improving the productivity of employees through unique people practices. He has been credited with the following industry awards: ¬ Emerging Leader of the Year award 2013 by ¬ Game Changer CEO of the Year 2013 (SHRM) ¬ CIO 100 - The Bold CIOs - 2008 (Reliance Infosolutions) ¬ CIO - Ones to Watch Award 2008 (Reliance Industries) ¬ Extended Manager Award - CIOL 2004 (Tata Teleservices) As an able leader of SHI, Alok got SHI recognized widely in the industry with the following several awards: ¬ CII Award for HR Best Practices in 2014 ¬ Global Excellence in Outsourcing Award - AIOP (Phoenix 2013) ¬ IT Innovation Award (Design & Engineering) - Computer Society of India 2012 ¬ Golden Company of the Year - Economic Times 2011-12 ¬ 7th Employer Branding Awards - World HRD Congress (Mumbai, India) 2013: • ‘Asia’s Best Employer’ Award • ‘Best HR Strategy’ in line with business • HR Leadership Award • Talent Management Award by Bloomberg TV India ¬ Employer Branding Awards - World HRD Congress (Singapore, Asia) 2013: • 7th rank in ‘Asia’s Best Employer’ award • Award for ‘Best HR Strategy’ in line with the business • HR Leadership Award Other recognitions: Alok had served on the distinguished panel of NASSCOM's GIC (Global In-house Centers) National Council members. The council members play a key role in major initiatives of the industry and include the torch bearers of IT industry as panel members. Books and Papers: Alok is an established author, with three books to his credit. Alok’s third and latest book, a novel, “The Spy from Unaula” is a 2015 publication. A handwriting analysis enthusiast, Alok collaborated with his wife Nandani on the book, “Handwriting Speaks” in 2006. “Value Sourcing – Future of IT Outsourcing” was co-authored with Keith Sherwell (currently CIO, Altice USA) and was released in 2013. Alok also researched and published two whitepapers: a. “Creating next generation captives” talks about the best practices that are helping generate higher value from the IT company captives.

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