Tuesday, September 13, 2005

How Accenture is trying to change the equation

ACN announced that it will be hiring 4,200 more employee for its Chennai facility in India over time. Company currently employs over 15K in India out of total 115K. India is the 2nd largest geography for ACN behind United States, UK has about 11K employees. If we assume Indian cost/employee is about 30% (or saving of 70%) of that of all the other employees (yes this is overly general assumption) then the 13% workforce in India is helping reduce ACN employee costs by about 9%. Now more realisitic scenario on cost saving is somewhere in 50%-30% range, given that the attrition rate in India is about 20% (compared to 18% avg globally) and wage pressure in India continues to go up, then that 13% of ACN workforce can only afford to given ACN 6.5% cost savings at the high end and and 4% on the low end of cost savings. Clearly moving as many heads over to India is clearly the best strategy for ACN and its U.S. peers since that number has a greater impact on costs then does cost saving/employee. The wage pressure has less impact as the total number of employees is still small in India. ACN is changing its cost equation as fast as it can, others will follow. But for a while INFY, SAY, WIT, CTSH all have some advantage in the cost equation.


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