IBM plans to continue hiring global services delivery staff in India by the thousands, adding to the 73,000 it already has in its global services and other operations in the country.

A large number of Indian outsourcers and multinational services companies have set up services delivery operations from India. Their competition for the best staff is driving up salaries. Companies are however introducing quality systems that enable them to weed out low performers. IBM, for example, sacked about 200 staff earlier this month, after a staff appraisal. Indian outsourcer Tata Consultancy Services said a day later it had terminated 500 staff after a similar staff appraisal.

Staff attrition in IBM's global services delivery operation in India is within 0.2 percent from the attrition rate at IBM's global services operations in the U.S., said Diane Gherson, vice president of human resources (HR) for IBM's Global Business Services.

"Our business model is based on that range of attrition, and we don't mind some attrition because it helps us get fresh talent, and offer growth to people in the organization," she said Wednesday.

Although staff salaries are rising in India higher than in most other countries, IBM has been able to recover the increased cost from clients by offering staff with higher skills, Gherson said. Salary increases will however eventually become a problem for India if the amount staff are charging cannot be recovered from clients, she added.

Even as some research firms have warned of reduced growth in IT budgets in the U.S. this year, IBM is not feeling the impact yet in its services business. "They will talk themselves into a recession if they are not careful," Gherson said. Besides, over 65 per cent of IBM's revenue comes from outside the U.S., she added.

Forrester, for example, forecast on Monday slowing growth this year for purchases of IT products and services in the U.S., based on the assumption that a mild recession will hit the U.S. economy in the second or third quarter.

IBM's services delivery strategy has been to set up delivery operations in a large number of countries to tap talent in these countries, and also to deliver to the customer a variety of skills and services, including language skills, and services delivered in the same time zone as the customer, said Rajesh Nambiar, Head of IBM's global delivery business in India.

The IDG News Service is a Network World affiliate.