Note: This article is about India but all of the problems discussed in this post are also being faced by most outsourcing companies in the world.
First, it was wage inflation which they are fighting by moving their offices out of the expensive business districts and by hiring fresh (low waged) graduates. Now, it's the Rupee's appreciation which creates an additional worry for India's outsourcing executives. The two events are further compounded by India's recent rationalization of its tax system which is perceived by some to be detrimental to the industry.
The problem of wage inflation increases in magnitude when Forex appreciation occurs. However, the two problems that can be managed with one solution. A creative method proposed by another blog is to settle wages and a few other costs in the currency of the outsourcing firm's contract price. the method effectively arrests the increase in costs brought about by any appreciation in the currency rate.
Should there be any devaluation of the local currency, the employees and suppliers alike are also bound to benefit. I would call that proposal "fair and equitable".
Taking it a step further, the outsourcing company can bring in additional value to their clients by introducing innovations that will result to bigger gains for their clients. A glaring example is India's newly introduced service area called "Knowledge Process Outsourcing (KPO)" industry which is turning out positive growth for 2007.
As for taxes, I maintain my position that Asia's outsourcing businesses should be officially considered a part of its export industry. As such, it deserves all he breaks being enjoyed by all the other exporters in the country. Importations of equipments should be free of any tariff, sales taxes should not be collected and several other incentives should be given to any offshore outsourcing company. An outsourcing firm exports its services and being a labor intensive industry, wages paid to the employees go back to the local economy in terms of consumer spending.
First, it was wage inflation which they are fighting by moving their offices out of the expensive business districts and by hiring fresh (low waged) graduates. Now, it's the Rupee's appreciation which creates an additional worry for India's outsourcing executives. The two events are further compounded by India's recent rationalization of its tax system which is perceived by some to be detrimental to the industry.
The problem of wage inflation increases in magnitude when Forex appreciation occurs. However, the two problems that can be managed with one solution. A creative method proposed by another blog is to settle wages and a few other costs in the currency of the outsourcing firm's contract price. the method effectively arrests the increase in costs brought about by any appreciation in the currency rate.
Should there be any devaluation of the local currency, the employees and suppliers alike are also bound to benefit. I would call that proposal "fair and equitable".
Taking it a step further, the outsourcing company can bring in additional value to their clients by introducing innovations that will result to bigger gains for their clients. A glaring example is India's newly introduced service area called "Knowledge Process Outsourcing (KPO)" industry which is turning out positive growth for 2007.
As for taxes, I maintain my position that Asia's outsourcing businesses should be officially considered a part of its export industry. As such, it deserves all he breaks being enjoyed by all the other exporters in the country. Importations of equipments should be free of any tariff, sales taxes should not be collected and several other incentives should be given to any offshore outsourcing company. An outsourcing firm exports its services and being a labor intensive industry, wages paid to the employees go back to the local economy in terms of consumer spending.
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