India Outsourcing: Pay Is Down, Competition Is Up

IT workers are getting smaller raises and staying put as leaders TCS, Infosys, and Wipro face a revenue decline and a bigger fight for deals

For Americans looking at India's $58 billion IT and outsourcing industry with both envy and anger, here's a bit of news that might prompt a little schadenfreude: During a year spent languishing in the doldrums because of the global recession, India's largest outsourcing providers handed out the stingiest raises in more than a decade. And for Indian engineers with two to five years of experience, the past 12 months actually saw them lose nearly 7% of their income. The national average raise, according to a survey by IDC, the market intelligence firm, was about 1.4%, with most of the salary gains going to those with the most experience.



That's a big change from the boom years of Indian outsourcing, when wages rose regularly by double digits. They increased 18% in 2007-08 alone, and close to 30% per year for the five previous years. In an industry that was starved for experienced workers, employees could easily jump from job to job, getting more money each time. "I changed jobs three times [and] tripled my salary," says Rajdeep Chakravorty, 28, a software engineer in Noida, a suburb of New Delhi. Chakravorty (who asked not to reveal the name of his employer) makes $28,000 a year, about twice the average pay for software engineers in India.



Now, however, many Indian IT workers like him are worried about the future and choosing to stay put, dropping attrition rates to about 15%. They have good reason to be concerned. The 2010 fiscal year, which ends in March, will be the first time the industry's top players will see a revenue decline, according to their own predictions. Infosys (INFY), the No. 2 player, expects a 3.1% decline in revenue to about $4.5 billion, and Wipro (WIT), the No. 3 player, expects revenues for the quarter ended Sept. 30 to drop to $1.05 billion from $1.11 billion a year earlier. (Market leader Tata Consultancy Services (TCS.BO) does not provide revenue guidance.)