July 26, 2007

 

Pause on the dream run

In last 3 years, the employees in technology industry took 30% annual growth in salary as routine. If current employer didn't match the figures, there were many employers in the line who were not only ready to match the outrageous expectations, but top it with bonus and other perks. I have heard stories about a global giant offering 30-40% raises to employees from the local biggies with 4+ years of experience. Without an interview. Just walk and collect the offer letter. I'm sure there is some amount of hyperbole here, but frankly, it wasn't incredulous.

The companies were/are on the wrong side of demand-supply equation and so they continued to sa the demands. It was like the growth of Indian telecom sector, where every million subscriber joining the network brought down the ARPU, but at macro level, the total profit was/is increasing. For IT companies, the growth in the volume of the business and depreciating INR helped mitigate much higher wage rise. Rising wages was never a reason to leave some low-margin business on the table.

But in last few quarters, the INR vs USD equation has changed. INR is at 9-year high against USD. And if the results of latest quarter clearly indicate that it is hurting the profitability of the IT companies. They have reduced their INR profit guidance.

What does all this translate for the employees in tech industry?

Obviously, the I-want-a-modest-30-per-cent-hike days are summarily over. Job switches will also not help much as companies will learn to say "no" to militant demands. There will not be any retrenchment, though. There is a reason for that. Irrespective of how much we Indians gloat about us being a software superpower, cold numbers tell us that the IT-ITES sector in India accounts to lilliputian 5% of global industry. (The global IT services market is estimated at more than $600 Billion, growing at 6% per annum. In absolute numbers, the global market is growing by total Indian industry per year, which is $30 bn for FY06-07!) To reiterate the point again, there is no slowdown in the industry and outsourcing is going nowhere. Remember, the companies have issued warning saying profit growth will lag the revenue growth! That's why it is a pause and not a full stop to the dream run.

While switching between Infosys, TCS, Wipro, Satyam may not ensure result into big hikes as all of them are grappling with same problem, IBM Global services may spring some surprises. They have already grown too big (53,000 employees) too fast (quadrupled in five years) in India. I guess, they can grow by another 100% by recruiting the not-so-happy employees of Infosys, TCS, Wipro and Satyam. (10,000 employees quit these four companies in last quarter.) Switching to IBM and other MNCs may squeeze out the last drop of this dream run. But, the plateau will be hit eventually.

All the folks working in IT industry, work hard and be nice with the company. Next year, they may let you keep your job. At a generous hike of 6%!

Picture taken from flickr album of Skylover

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