Thursday, August 11, 2005

Eroding competitiveness of the IT services industry

The appreciation of the Rupee, the rapid rise in salaries (by as much as 36% y-o-y), inflation, increasing tax burden(all tax concessions to the Indian IT services companies to go in the next 7 years or so) and increasing competition form other low cost destinations countries are likely to seriously erode the margins for the software services companies in India. The remedy lies in growing the volumes, investing in training to compensate for skill scarcity (which in turns pushes salaries rapidly) and moving to deliver higher value services and products.

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