Date:02/12/2008 URL: http://www.thehindubusinessline.com/2008/12/02/stories/2008120251710400.htm

Rising wage costs eroding competitive edge: Satyam

Company eyes SEZs as STPI regime is set to end.

Our Bureau

Hyderabad, Dec. 1 Satyam Computer Services, the fourth largest IT services and solutions provider in the country, has said that it might witness an increase in costs of personnel, particularly project managers and other mid-level professionals.

The company, which is also listed on New York Stock Exchange, has said in routine disclosures to the stock exchange that the competitive advantage it enjoyed in terms of lower cost of wages might go.

Losing cost advantage

“Wage cost in India has been significantly lower than that in the US 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 US Securities Exchange Commission (or SEC), while reporting on the performance for the quarter ended 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 labour cost areas,” it said.

The cost of revenues (or expenses) went up 19.4 per cent 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 per cent of its revenues. The figure rose by 21.90 per cent over $267.20 million in the comparable quarter last year. For the six-month period, the associate compensation and benefits expenses rose by 29.6 per cent to $638.90 million (or 49.50 per cent of revenues) as against $493.30 million in the same period in 2007.