Rising salary costs to dent margins: Polaris

Polaris Software, which specialises in banking, financial services and insurance (BFSI) segment, expects that its expertise-based model will fuel the company's growth in the coming years, but the increased salary costs would put tremendous pressure on the margins.

In its latest annual report, Polaris also anticipates the pure services margin to drop down and finally settle in line with global services companies' margins.

"Our products portfolio has opened new markets for Polaris in Asia and South America, which were not open to our service offerings. Our expertise-based model will fuel Polaris growth in the years to come and command a niche position in the global market place," Polaris annual report 2005 said.

With the software industry becoming more and more mature, the price points will start getting stabilised. The increased focus by global players on India could lead to a cost-spiral, it said. "Since expertise will always come at a premium, the input costs could go up and the increased salary costs would put tremendous pressure on the margins," it said.

Another challenge for Polaris would be in attracting and retaining talented workforce.

"To meet the demands and services of our opportunities pipeline, ready-made talent in the market might not fit in with the requirements. In an industry marked by high attrition, attracting and retaining high quality resources would indeed be a prime challenge," it said.