The start of a new fiscal has put the rising cost attached to staff pay center stage. "Employees come to you in the month of April and demand a raise that's in line with industry standards. The average increase in salaries is about 15 percent; it's been growing at the rate of 10 percent more than to our revenues," says Jathal.
Parallel to that are the costs associated with a higher number of employees and the infrastructure needed to support them. At Kolkata-based Parth Technocomm, Director Tejas Mehta says the company's IT expenses have risen by 8 to 12 percent. Some of that stems from increased storage requirements, says Mehta. "That's an added cost I don't really want to invest in, but I can't do without. The fact is I need to provide adequate IT support to my employees," he says.
Then there are rentals. "The cost of infrastructure has gone up by 20 percent in Bangalore in the last year and the value of property in prime locations keeps increasing year-on-year," says R.S. Shanbhag, CMD of Bangalore-based Valuepoint Systems. "We have to shell out a bomb for a prime location in the city. That extra cost affects my overall budgetary allocations." Jathal from Ishan Infotech adds that the price of logistics has also swelled thanks to the higher cost of fuel. "In Gujarat, the price of CNG has increased from Rs 50.20 per kilo to Rs 56.90 just in the last couple of months. That adversely affected our transport costs," he says.
Like Gupta from Albion InfoTel, the combined effect of these rising costs have affected Jathal's expansion plans. He says that he hasn't been able to set up new branch offices in the last quarter primarily due to escalating operating costs. "We have distribution set-ups only in limited places and do not have the option of branching out everywhere in the country as of now," he says.
In Bangalore, Valuepoint Systems has been hit harder. "The increased cost of operations has eroded the company's profit margins by 15 percent. That's a big impact," says Shanbhag. In order to lower its costs, Valuepoint Systems has been forced to take some harsh measures. "We've had to close down branches at multiple locations like Kolkata, Calicut, Kochi, and Trivandrum to save operating costs," says Shanbhag.
Channel partners, however, are finding ways to strike back. At Parth Technocomm, Mehta has centralized storage to lower individual storage costs. The company has also begun to use video conferencing to negate the expenses associated with employee travel. "We are trying to reach out to clients and prospective customers via video. We've done this to reduce our travel budgets," says Mehta.
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