Mumbai: Is India’s software talent getting too expensive? Henning Kagermann, chief of SAP, the leader in client and server enterprise application software, believes so. His recent statement that Indian software developers are becoming expensive and SAP intends to look elsewhere for hiring, has sparked off a debate on whether India can retain its competitive edge in software.

Kagermann was stating what the Indian IT industry knew for a while. The salaries have been rising because of a demand-supply mismatch in the software developers market. The mismatch is acutely felt at two levels: fresh and middle-level. Middle-level salaries have annually risen by as much as 15-18% for the past two years compared with 10-15% in other categories.

Puneet Jetli, general manager at the People Function department of MindTree Consulting, is of the opinion that Kagermanns statement and a threat from competitors like China and east European countries should not be taken lightly. “The salary increases of Indian software developers have been in range of 15% in 2005 and we expect it to be between 14 and 15% in 2006, and in some cases a little higher. Demand is especially high for software developers, who specialise in package implementation, data ware housing, hardware design, board design specialists and domain consultants,” says Jetli.

“The consistent rise in the salaries of software professionals is likely to give rise to lowcost centres, which will emerge as alternate software destinations,” says Hema Ravichandar, former HR head at Infosys India. “This is a challenge for the Indian IT industry. India retains the competitive edge when it comes to the depth of technical talent, language skills and ability to deliver quick and largescale manpower ramp up programmes. And this is evident in the way many multinationals are viewing India,” she added.

The good news is that the Indian software industry, in conjunction with educational institutes, is slowly getting its act together. Nasscom and experts are taking a hard look at whether the available graduates can match industry expectations and have the required skills.