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ClickSoftware Technologie (CKSW) Message Board

  • cbird69 cbird69 Apr 7, 2009 11:12 AM Flag

    Actual Cost of Indian Labor

    1000 rupess + $19.84

    The post claiming an Indian worker can be had for $200 per month is true only if it is a call center worker.

    Another post claimed that the cost of employing an Indian worker was $65,000 per year.

    Please use common sense and do a little homework before making such claims.

    Another thing, the valuation of an acquisition is not based on any multiple of cost, but on multiples of cash flow or revenue.

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    • Fuji,

      If we were talking FMCGs I would agree with you, but having considerable experience with FMCGs can tell you that every penny spent in India is done so on the hopes this market's spending power develops further, not for adding to the bottom line in the foreseeable future. CKSW has so much low hanging fruit in developed markets where labor and transportation costs really do demand optimization that chasing an India dream seems ill advised. I can only assume they are doing this because they "think" they can reduce their development costs. Well, all those trips to try and sell software will now be replaced with all those trips to try and coordinate development activities... I wish them the best but know it is an elusive goal.


    • Real cost= New sandals, and a bicycle

    • Yes cost of labor is cheap, and being on time my not be that big of an issue. But on the company side the cost of trucks and gasoline are significant. Efficient scheduling and optimized routing to reduce miles driven could be a big pay back. Keeping track of assets and high utilization rates would be a good ROI.

      As I pointed out in earlier emails, in these economic times Moshe's cash can go a long way acquiring companies versus buying back shares.

      I give Moshe the benefit of doubt, that he knows what he is doing.

    • Flying,

      The primary reason I post on the chatboard is so people can point out flaws in my perspective. Your point is very valid.

      I still like CKSW's Manchitra acquisition a lot. If Click is going to be a player in the Indian sub-continent they needed a stronger organization in India. Flying technicians in from other parts of the world to support new customer implementations involves too much expense and the risk of cross-cultural confusion. Manchitra appears to have staff trained in schedule optimization software and this alone will save 6+ months of training new hires from scratch.

      I like that the $3 million price and 20 person staff are modest in size and don't bring the risk a larger (ie $10+ million/50+ staff) aquisition would represent.

      This should enhance the sales effectiveness of Click, IBM and SAP in the India/Pakistan market. It should also provide stronger support for Click's existing India customers. In the long run their satisfaction is the most important foundation for building the customer base and revenue stream in that market.

      It was encouraging to see another solid day of volume at the $4+ level.

    • Fuji,

      One potential hole in your analysis is that for this percentage of the population that wants the better things in life, they likely hire some of that cheap labor as house help and could not care less when the guy shows up to fix something since they go about their lives and let the house help deal with headaches... this is probably more true in India than China where a "real" middle class is emerging and would not fall into that scenario...

      But since we are talking about an India play, I just hope they have done their homework...


    • Thanks Fuji

      Consumers do indeed want a better quality product (which is related to the product-quality-oriented aspect of a given business), and they are willing to pay more for it (at least in India that has started to be the case as far as I can sense).

      But what still has not taken place is the same consumers are not willing to pay extra for a efficient quick delivery of the product which is more related to the service-oriented aspect of any given business.

      In these countries people seem to be just happy getting the product - how long it would take for them to receieve it is secondary to them and not of much importance. Again I am sure as these markets mature and consumers becoming overloaded with multiple vendors competing with one another in an intense way to get consumer's attention, then service-oriented aspects of business transform themselves from a second class citizen to that of first-class. Still way to go... but it is a matter of When not IF.

      In that case Click may have made the right decision - the question is how much of a patience share holders have to see the ROI. In my view it will be at least a few years still (3-5 years). But then I have proven to be wrong many many many many times in the past. :)


    • Ajpb,

      Thanks for the perspective.

      It is a stretch to apply apple industry experience into the China and India markets, but given that is the only thing I can offer, I'll take a shot.

      China is the highest volume and cheapest apple producing country in the world. We have to compete head to head with our $100+ per day labor against their $3 per day labor.

      One would presume given this production cost imbalance Washington State could not export apples into China. In fact, it has long been one of our better markets with 1.5 million boxes shipped into China and Hong Kong in the first half of the year alone.

      What makes it work is there is a small but rapidly growing percentage of consumers who want higher quality and are willing to pay for it.

      I think your assessment of the China and India market as a whole is likely accurate. Most consumers want the cheapest price and are not willing to pay extra for faster or more reliable service that schedule optimization software could help deliver.

      I suspect there is a percentage of consumers and businesses, however, who would gladly pay for that higher level of service. As with Washington apples, Click does not need a very big slice of a growing one billion person market to be very successful and very profitable.

    • Fujigrower:

      Re: "Who cares if an organization's labor costs are 25% higher because of inefficient scheduling if that labor costs next to nothing?"

      This is true. But more importantly and again based on the high-tech experience that I have had in India and China. in this counties as oppose to the U.S and Europe, things such as automated scheduling for efficient deliveries, etc., are really considered to be as luxery. Businesses dont really care and consumers dont mind much for it either. It is sort of like having a sunroof in your car. If it is there thats great, but if it is not so be it...

      The main reason for this is that the labor cost (by itself - i.e. salary and wages) is cheap hence 5 times 0 is still the same as 100 times 0! :) Most recently though I have come to see that the gas costs do matter, but not to the degree that businesses spend additional money to offset it through things such as efficient scheduled deliveries, etc.

      I am sure at some point the business dynamics will change when consumers in both India and China start demanding for better service. But at this time in these countries "service" really is not cared much for the same it is done in the U.S. You can see this in all sectors of the economy (e.g. from resturants to product deliveries, to (even tech. support) . Consumers simply dont mind for not having or getting the optimum service and are not willing to pay anything extra for it - hence businesses dont see any reason to have it either especially since the investment amount they have to make will outweight (or at best equal) the amount they end up saving in cutting their labor costs.

      So based on that I am not so sure of ROI that Click is making in India is any wiser than just spending the money to purchase its own shares back, or to focus on its business expansion in the Western world (i.e. U.S, Europe or Japan where the population is very much service concious and expects service - not so much in Europe as in the U.S but still...).

    • Hope they dont use them as answering service. I still can't understand a word they say on the phone.

    • The actual cost of doing high-tech business in China and India is about $65K. This includes annual salary, capital equipment, insurance, givernment taxes, and all related costs.

      I know, because I am in the business of outsourcing. :)

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