'Rising wage costs erodes Satyam's competitive edge'

Hyderabad: The escalating employee cost is depriving Satyam of its competitive edge in the market. The IT services and solutions provider has said that it might witness an increase in costs of personnel, particularly project managers and other mid-level professionals.

"Wage cost in India has been significantly lower than that in the U.S. and Europe. However, as wages in India increase at a faster rate, we may experience increase in our cost of personnel," the company stated in Form 6-K report to U.S. Securities Exchange Commission (or SEC), while reporting on the performance for the quarter ended on September 30, 2008. "This might prevent us from sustaining this advantage and negatively affect our profit margins. We may have to increase salaries more rapidly than in the past to remain competitive with other employers, or seek to recruit in other low labor cost areas," it added.

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The cost of revenues (or expenses) went up 19.4 percent to $394.50 million ($330.30 million in the same quarter last year). Of this, associate compensation and benefits held the lion's share at $325.20 million, or 49.90 percent of its revenues. The figure rose by 21.90 per cent over $267.20 million in the comparable quarter last year.

The company further said that for the six-month period, the associate compensation and benefits expenses rose by 29.6 percent to $638.90 million (or 49.50 percent of revenues) as against $493.30 million in the same period in 2007.