Indian outsourcer Infosys Technologies has posted a 37%
increase in quarterly profits for the three months ending June, but
says margins have been hit by higher wages awarded to its low-paid
Indian staff.
OvumHolway analyst Samad Masood said, “The main challenge for
Infosys and its Indian offshore peers is the rising costs of their
business.
“Margins are being eroded as these companies expand overseas and
hire more Western staff. Additionally, staff costs in India are
increasing as demand for experienced Indian outsourcing executives
has rocketed.
"For example, some media reports say that Infosys's staff costs
grew 15% year on year in the first quarter due to salary rises
intended to stop employees jumping ship to other competitors.”
Infosys is second only to Tata Consultancy Services in the
Indian outsourcing market, and the two are currently battling it
out for big contracts from Dutch-owned bank ABN Amro.
ABN Amro is believed to be considering outsourcing up to 2,300
IT jobs to cut costs as part of its contract plans, with India a
strong candidate to get many of the jobs. After a recent jobs cull
ABN is already down to about 3,500 IT employees.
IBM and Accenture are also bidding for the contracts, which
include application development and maintenance.
Infosys’s net profit for the first quarter rose to 5.32bn rupees
(£70m) from 3.88bn a year ago. Sales rose 36.5% to 20.71bn
rupees.