Oracle Slashes Salaries in India

The current economic crisis it hitting even the booming IT-BPO sector in India. The Economic Times reported today that Oracle is slashing salaries of a group of employees by 50% and is converting them to part-time status. The cut was triggered by some unique factors of the group, but is also a sign of the broader impact the international economic downturn is having on India.

While difficult for the employees involved, it is another positive sign for US & European firms outsourcing to India. Salary costs, previously growing at 20% or more, should moderate in 2009. Salaries are the primary cost to any outsourced services operation and high demand in India had driven wage inflation to 20% or higher. NASSCOM, India's trade group for the IT-BPO industry, measured growth of the IT-BPO sector at 33% in FY 2008, but has down graded expectations for 2009 twice and is now forecasting growth in the high teens.

The employees affected are in the Oracle prime sourcing department. The group includes employees from the merger with iflex Solutions and has its major clients in the hard hit financial services industry. JP Morgan, which was closing in on a large project with the group has delayed the project indefinitely.

The department has about 2,000 employees split between Mumbai and Bangalore. To date the cuts have impacted 300 junior and mid-level employees. If the financial services market continues to deteriorate, one might expect the cuts to go further.