Indian outsourcers warn of rising salary costs

Warnings about rising salaries have tempered a strong set of financial results from India's leading IT companies - Infosys, Satyam, Tata Consulting Services (TCS) and Wipro - on the back of continuing demand for offshore outsourcing services.

Wipro this week beat market predictions with a 44 per cent rise in quarterly profits to $131.5m for the three months ended 30 June but its shares dropped by 5.5 per cent after it warned wage rises will hit its 24.6 per cent operating margin by 1.5 per cent in the next quarter.

Wipro said it is also looking to continue to build on the six acquisitions made in the first half of 2006 with more takeovers in Europe and the US.

Satyam, India's fourth largest IT company, today reported a whopping 75 per cent jump in quarterly profit to $77m but saw its share price fall after also warning that rising salaries - due to increased competition for staff - would impact its operating margins.

TCS, India's biggest IT company, had earlier this week also reported that its quarterly profit rose by a third to $185m with a "very healthy" future outsourcing deal pipeline, and said it plans to add 30,500 new employees to its current 71,190 headcount this year.

Last week Infosys also reported strong figures with a 44 per cent per cent rise in quarterly profit to $174m.

The Indian IT outfits' results have been helped by the falling value of the rupee against the dollar.

Analyst house Ovum said in a briefing note the results confirm the trend that growth of the Indian offshore outsourcers is slowing and margins are reducing but added that the numbers are still "very robust" and far ahead of traditional western competitors.