Topic: India in 2011 - Labor and Cost Sustainability in the Indian Offshore Services Market

The recovery of the global offshore services market is leading to a revival in hiring and ramp-up in the Indian offshore services market. As service providers and captives increase the pace of hiring and ramp-up, the labor market will feel a supply pinch potentially causing increases in wage inflation and attrition rates. Further, the rupee-dollar exchange rate will be a critical dynamic that will impact buyers and providers of global services.

In this viewpoint, we explore likely trends across these two fronts specifically with a view to how these might evolve in 2011.

Key takeaways

Consensus in the industry indicates that the recovery in offshoring will be sustained through early to mid 2011. As service providers prepare to support this increase in demand, they are putting in place aggressive hiring and ramp-up plans.

We foresee tightening of the labor market, especially given that most of the growth will be in the top 20 cities and supply available in these cities is likely insufficient to meet demand.

The INR-USD exchange rate will be an important factor to watch. Assessments regarding the direction of trending are divergent, and guidance from service providers suggests an expectation of margin tailwinds that eventually may impact buyers of services.

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