A report recently published by a well-known company states that the Multinational Companies which have their development centre in India wouldnt mind shifting it to China, Pakistan etc. since the cost of operation is less over there when compared to India.

In an interview, an MNC Head has mentioned that the development cost (of the software) in India is increasing day by day. i.e. the Salary of the developers are increasing at a fast pace & they will start looking at alternatives.

Let us look at the reasons for that.

From an Employer perspective: The cost of operations are increasing day by day. A Fresh Candidate (Developers/Programmers) is being offered about 14k - 15k (min package) in the software industry & they are expecting about 20-25% increase year on year. If they dont receive that expected package, they leave that company to join another. The other company gives him a hefty package which increases his pay from 30% to 50% (I have seen 100% increase too). Due to this, the cost increases & the same cycle starts over here.

From a Customer perspective: The customers would like to reduce the expenditure on software over a period of time. An Indian/MNC company, if it takes up the contract will have to reduce the price over a period of time so that it keeps the contract with itself. Otherwise another company will quote at the customer place & take away that contract at a lesser price. So the existing company has to reduce their price year on year which will affect their topline as well as bottomline.

Since the companies would like to maintain their growth in topline & bottomline, they would like to reduce their cost of operations. Thats why they outsourced most of the development from USA to India. Now if the cost increases over here, they will start looking at alternatives which is well provided by China to a greater extent and Pakistan, Bangladesh to a smaller extent.

China, in particular, is seen promoting software at a brisk pace. A new Joint Venture formed by TCS & Microsoft with the Chinese Government is an indicator to this. They are also training their people in English which was seen lacking by them.

The Indian Industry has to look at alternatives to minimise the effect of this or otherwise the Software Industry which has made many middle class people turn into lakhpathis will migrate to other countries in the near future.