Escalating personnel costs in India -- one of the world's largest markets for off-shore software development services -- have prompted business software vendor SAP to begin looking elsewhere for lower-cost, skilled programmers.
"India is slowly getting expensive," SAP Chief Executive Officer Henning Kagermann said in an interview published Monday in the German edition of the Financial Times. "We have decided to hire a certain number there, and then start looking at other locations."
SAP spokesman Frank Hartman confirmed the statements.
Kagermann pointed to India's relatively high staff turnover, which is fueling personnel costs, Hartmann said. "Personnel costs are key factor in the software industry."
Staff turnover in India has increased as SAP competes against other IT powerhouses such as IBM and Microsoft as well as local Indian IT companies such as Infosys Technologies and Wipro for qualified staff.
SAP is likely to expand in China and Eastern Europe, according to Kagermann. The reason why the German vendor currently has only limited software development in China is largely due to the country's lack of protection for intellectual property rights, he said. "But that isn't going to prevent us from doing more in China," he said.
Today, around 1,000 people work for SAP in China, mostly in sales and marketing, according to Kagermann.
Eastern Europe is another area where the German CEO sees opportunities to offshore software development. Turnover is low, he said, and the costs aren't too high.