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11/27/2006
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TCS To Raise Outsourcing Prices

The company will hike prices on new contracts from 5% to 10%, and will push for an increase of 3% to 5% on existing contracts that are up for renewal, a spokesman said.

Tech outsourcer Tata Consultancy Services will increase the price of services by as much as 10% on new contracts, a company spokesman confirmed on Monday.

The company, which provides a range of IT services to U.S. businesses from low-cost operating centers in India, will hike prices on new contracts from 5% to 10%, and will push for an increase of 3% to 5% on existing contracts that are up for renewal, the spokesman said.

Rising salaries in India, combined with TCS's move into higher value services, are what's behind the increases. "We're undergoing a shift from traditional application work to consulting and business services that are of greater value to the customer," said the spokesman.

At the same time, tech wages in India are increasing at about 15% per year as more and more companies -- Indian and American -- compete for skilled labor on the subcontinent.

Offshore service providers typically charge customers between $20 to $25 per hour for programming services, considerably less than prevailing rates in the United States. To compete, Western tech services providers such as IBM and Accenture have been building out their own presences in India, driving up local salaries in the process.

A portion of those cost increases will be passed on to customers. "When there are fresh new contracts and competency is involved and the customer is willing to pay for the expertise, we will raise the rates," said TCS CEO S. Ramadorai, in a weekend interview with the Times of India.

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