Wages increase at home and abroad
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Dotcom-era pay rises in UK and developing countries, but outsourcing will not be affected, say analysts.
Wage inflation in leading offshore destinations will not have a long term impact on the viability of offshore outsourcing, according to researchers the Everest Group. The leading destination, India, will continue to be a prime location for UK businesses seeking to outsource IT skills for the next 30 years, it concludes.
Wage inflation in India is currently around 10% – far lower than some estimates, says Stephen Dunn, managing principal at Everest. Furthermore, other factors such as exchange rate movements are helping to counteract inflationary pressures.
Other offshore destinations will also continue to be attractive locations, with China, the Philippines and Mexico expected to retain their cost advantages for 30 years. However, the Czech Republic looks set to lose its appeal within five years, according to Everest.
Meanwhile, the UK is undergoing an IT wage inflation of its own – with salaries increasing at a rate not seen since the dot com era. According to IT recruitment service, iProfileStats, and the Association of Technology Staffing Companies (ATSCo), pay for permanent IT staff rose by 15% year on year. This compares to an average UK increase of just 3.6%.
Wage inflation is being driven by a shortage of skilled staff. The effects are most pronounced in the public sector, which has seen significant migration of key staff being enticed to the higher-paying private sector. The average annual salary for a UK IT worker is now £32,000.
