Escalating salaries pose threat to Indian IT

By agencies   |   Wednesday, 25 May 2005, 07:00 Hrs
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BANGALORE: Promod Haque, who was ranked first among global dealmakers by Forbes, said escalating salaries posed the biggest threat to the development of technology companies in India.

Salaries for technical workers in Bangalore are likely to catch up with Israel’s, where employees are paid half U.S. levels, in the next two to three years, Haque said.

Compensation levels in the city have already increased to about one-third of that paid in the U.S. from one-fifth a few years ago, he said. Rising pay may jeopardize the country’s chances of winning the 3 million so-called white-collar jobs that will be moved overseas from the U.S. by 2015, Haque, 57, said.

Salaries in Indian cities such as Pune and Chennai, rivals to Bangalore, are already at a quarter of U.S. levels, said Haque, managing partner of Palo Alto, California-based Norwest Venture Partners.

“India today is the leading recipient of information-technology outsourcing jobs,” Haque said. “If salaries continue to escalate, China is more attractive to us as venture capitalists, Israel is more attractive to us, and Eastern Europe is more attractive to us.”

Employees at start-ups in Israel and Eastern Europe are more willing to accept stock options instead of large salaries, helping maintain lower costs, said the Indian-born Haque.

Bangalore is two to three years away from getting serious competition from Israel, where the engineers also have more product development experience, he said. “The cost advantage that India had is starting to erode.”

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