India-headquartered IT services giants Infosys and Wipro have announced pay rises across their workforces in India in a move that reflects the coming to an end of the time and material IT outsourcing model and the competition for skills.
The suppliers, like other offshore IT suppliers, expanded through offering low cost labour to US and UK corporates, but this model that offers linear growth is not being planned as the way forward.
Infosys said this week that it would be increasing salaries by an average of 8% in India, compared with an average of 3% in other regions.
Despite claims that the pay rises are to address low morale, a source said Infosys, like other Indian services firms, have recognised that “the old time and materials model that meant more people and more business is going away.”
An Indian IT professional told Computer weekly that the big Indian suppliers are being forced to increase salaries to attract the best staff in India.
"The big companies have had a period of slow growth and they are not seen as exciting places to work anymore. There are many tier two Indian suppliers competing for the best people now,” he said.
Peter Schumacher, CEO at management consultancy Value Leadership Group, which surveys the Indian suppliers said that companies such as Infosys need to address high attrition rates.
“Infosys's decision to boost offshore salaries and reduce the variable component should help bring down attrition rates. The increase in onshore compensation by about 3% is at least in-line with the increases given at European firms.”
Another trend among Indian IT firms, which supports the move away from the time and materials model, is the increasing strategy of recruiting staff in countries where there customers operate. Wipro this week announced that it is adding 1,000 full time staff in India.