Wage pressure could hit IT companies: UST Global CEO

THIRUVANANTHAPURAM: A year ago, tech companies around the world took pride in their bench strength, trusting that an ever-ready bench would be the ideal insurance to seize projects that came at short notice.

Fast forward to 2009, and benches are on unwinding mode. As compensation costs are becoming decisive factors in technology companies' performance, a roll-back of salaries are on the cards across the IT spectrum, says UST Global CEO Sajan Pillai.

"A lot of companies grabbed (human) resources over the past few years. Most tech companies were growing at roughly 20%, so they kept an extra 30% staff on the bench for emergency, and went on to hire an additional 10% from the campus. All that wage pressure is going to tell on IT companies", Mr Pillai told ET.

He said that the campus recruits were in such large numbers across tech companies that the companies resembled large universities. "Bulk hiring and training was the norm in IT companies these past few years, but that is unlikely to continue", according to Arun Narayanan, Joint COO of UST Global.

Mr Pillai said that in the typical Indian operations in the IT sector, middle management salaries that have been in the Rs 70,000-Rs 90,000 range could see a winding down to the region of Rs 50,000 or thereabouts as companies aim for a cut of roughly 30% in compensation costs.



He said the days of IT companies waiting for projects were over and done with. "Clients are not going to say, here is a piece of work for you, take it. IT companies will have to approach clients and convince them of how more efficiency can be achieved through a particular solution", Mr Pillai said.

On the emerging trends in the industry, he said off-shoring would continue to grow and that IT business would remain healthy, with the key difference that bank funding would be difficult to come by in the short term.