It looks like the global economic turmoil and the dramatic Wall Street meltdown is beginning to hit Bangalore.
The collapse of top US financial firms will cause a dramatic slowdown in hiring among outsourcing companies. The banking, financial services and insurance sectors account for 40 per cent of revenues for India's $52 billion outsourcing industry (as of 2007-2008).
Firms such as now-bankrupt Lehman Brothers and bought-out Merrill Lynch were big customers and provided millions of dollars worth of lucrative contracts to Indian technology services companies.
For tech employees, jobs no longer come with a lifetime guarantee. Companies are shedding people in small numbers and keeping their actions under the radar. The dreaded pink slips have arrived in Bangalore.
The biggest indicator of the slowdown is the salaries and raises. It used to be acceptable to have lateral hires ask and get 30 per cent increases on their previous salaries. Annual hikes have varied between 15 to 40 per cent in the good years. All that is now a thing of the past. Wage increases are now down to more realistic, single-digit numbers.
It may not all be bad news, though.
Some outsourcing companies see a bright lining to the cloud--lower attrition rates. In the last few years, Bangalore firms have averaged attrition rates between 20 to 40 per cent, the highest in any Indian city.
Some analysts seem to think that, as the fall of financial firms leads to business slowdowns for the Accentures and IBMs in the US and Europe, they may move more work to lower-cost offshore locations such as Bangalore.