Wipro: 15-20% wage hikes will make you an expensive destination

The arrival in Romania of Azim Premji – the man the international press has named “India’s Bill Gates”, comes as no surprise and indicates Bucharest is on the billionaire’s list of priorities. Wipro, a leader in the global IT industry and India’s biggest software firm, with annual sales of 5bn dollars, is just present in Romania with the BPO unit, which currently employs 150 Romanians.
In the coming months, Premji plans to bring the IT development unit to Romania.
“We also want to bring the software development unit to Romania.
The next step is to bring the technological infrastructure unit at least. This will happen in the next three to six months”.
Premji decided to bring the BPO unit of Wipro to Romania in the wake of a market survey that eventually whittled down to two finalists – Bucharest and Budapest.
The lower costs and language skills weighed the most in the decision to choose Bucharest. “At present, we’re looking at other cities to open the second BPO centre,” specifies Premji.
Despite Romania having won several rounds in the European fight to lure investors, the rapid increase in wage costs is likely to eliminate it from major international firms’ expansion list.
“(…) Even though Romania’s wage base is much lower, these wage increases (by 15-20% i.e.) will shortly turn you into an expensive location,” says Premji, adding Bucharest is three times more expensive at present than India as regards costs per employee.
The rate at which wages have risen in recent years is hurting BPO players’ turnover. Labour market volatility is the main concern as regards the future of outsourcing businesses in Romania.
“Things have gone well so far. I think we’ll have around 300-400 people in Romania in the following year”.
Although the outlook is no longer as upbeat as a year or two ago, if he had to decide again to open a BPO centre in Eastern Europe, he would choose Romania again. With a word of warning, though, “You must pay attention to wage increases! It’s a very serious problem.”
More than that, Romania could lose ground to some cheaper and bigger markets.
Businesses the Indian billionaire would bet on at present include energy, production and the outsourcing services industry.