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India needs a key stroke for its technology

The rise of India’s $64bn information technology and outsourcing industry has been praised by the world as a great success story.

Financial services, telecommunications and retail companies in the US and, to a lesser extent, Europe, would find it difficult to draw up a business plan without factoring in that India will take care of the “back-office” work.

However, what seems to puzzle many – academics and industry specialists alike – is how India’s IT and business outsourcing industry has managed to keep going despite a growing shortage of talent.

India’s universities churn out thousands of engineering graduates a year, some estimate the number to be as high as 500,000. However, according to India’s IT industry lobby, Nasscom, only about 25 per cent are suitable for employment.

The problem is even bigger when it comes to highly-skilled labour; the country produces only 7,000 PhDs a year in science, engineering and technology subjects, according to World Bank estimates. Microsoft India last year went as far as saying that India’s shortage of computer science PhDs is so dire it could threaten the country’s role as the world’s outsourcing hub.

The World Bank has made it clear in a report that if India wants to retain its role as market leader in the business of outsourcing, it needs to invest more in higher education, with a specific focus on engineering and IT.

However, not withstanding these alarming messages, the IT services industry hired 375,000 people in 2007, and is expected to take even more in 2008, according to Nasscom.

With demand for outsourcing on the rise, how do Indian IT champions such as Infosys, Tata Consultancy Services (TCS) and Wipro cope with the lack of talent?

A report by Duke University says they have overcome deficiencies by investing thousands of dollars in their own training and development facilities, with the aim of turning non-IT graduates into programmers.

Just as bright IT graduates are lured by careers in banking and finance, IT companies have started recruiting people from the healthcare sector, for example, including doctors, nurses, and paramedics.

“Because they are investing in, cultivating and empowering their employees, Indian companies can hire bright but largely inexperienced talent and train them to be world-class engineers and scientists,” said Vivek Wadhwa, of Duke University and the report’s lead author. “India is proving what a nation can achieve when it invests in upgrading the skills of its workforce.”

Infosys – for example – hired more than 30,000 new graduates in 2008, most of whom have spent time at the company’s Global Education Centre in Mysore.

By the end of the year, or early 2009, Infosys hopes to complete its second training centre, which will enable it to train 40,000 graduates a year. The more than $400m cash injection to create Global Education Centre 2, “will be the largest corporate investment in educational infrastructure in India and one of the largest globally,” says Narayana Murthy, chairman of Infosys.

“The scale of investment is a testimony to our willingness to invest in future business needs ... Investment in training is a huge necessity for knowledge-based corporations.”

However, training ought not to end after the first couple of months. In this fast-changing sector, it is essential that employees keep learning. For this reason, Satyam, one of the largest IT service groups, is investing $8m to develop online education to help its staff stay up to date.

Top management is directly involved in the recruitment and development of new employees from very early on: 20 of its 80 senior executives mentor students on various campuses and many others serve as guest lecturers in the hope of inspiring a new generation of IT enthusiasts.

Retention of personnel remains a serious problem among Indian IT companies; many experience a 15 per cent annual attrition rate. But Duke University’s study points out that “annual attrition rates in the 20 to 25 per cent range are not uncommon in the IT services industry in the US”.

In the long term, the real risk is the sustainability of a system that sees private companies taking on most of the financial burden of training employees.

The founder of a venture capital firm in Bangalore says it is unwise for the Indian government to devolve a great deal of training to private companies because in the future they might decide to move elsewhere, leaving a vacuum.

For companies such as Infosys and TCS, it may make more sense to start looking for opportunities elsewhere.

Aegis BPO, an outsourcing company owned by Essar Group, has recently invested $250m to buy PeopleSupport, a US IT services group, which has operations in the Philippines and Costa Rica. Although Aparup Sengupta, the company’s chief executive, says the move is not due to a lack of talent in India, he does suggest there are other spots in the world that offer the same if not better opportunities than India did at the start of the outsourcing boom in the 1990s.

Источник: Financial Times

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