Reduce the cost of IT Services to create more jobs
Today’s article in Economic Times “Infosys losing margin edge as rivals catch up” reveals that Infosys has been operating at a high margin by quoting premium for their services. While it is good to feel that an Indian company can stand up globally to get that premium for a service which is no different than what any other service provider of similar size would provide. A well run IT organization would have salary cost anywhere between 60 to 70% of the total cost. Not more than 10% of the salary cost would be part of overheads which is passed to customers. IT companies have to keep bench resources which helps them to get new projects and a well run organization would have a productivity of 65% to 75% for any associate in the organization. The 35% to 25% productivity loss is in form of bench and employee offs. Cost of marketing and selling also is about 15% of the company expense in a typical scenario. In all, a justified quote by a vendor should be to the tune of 2.3 times the employee Salary which would include about 20% profit margin. It means if any third party vendor gives a 5 year experienced resource to whom the salary is being paid at INR 8 lakhs, the billing for that person in India would be for INR 18.4 lakhs or $19/hr. However it is generally seen that most of the IT majors charge offsite rates way higher even at lower salary being paid to their employees. High billing is not helping the industry except creating cash reserves for IT majors. The amount of work which should come to India is getting reduced because of higher billing and impacting job creation adversely.