Is India running out of skilled IT workers?

Despite graduating about 400,000 engineers and scientists every year, India is already starting to wonder whether it will have enough in the future to meet the demands of globalization.

An excerpt from the BBC story:

Nasscom, the Indian software industry association, estimates that by 2010, the Indian outsourcing industry could have $60bn worth of global sales, up from $23bn in 2006 - and that would still only be 10% of the potential market.

But if the industry is to triple its revenues, urgent action is needed now to increase the supply of skilled labour, Nasscom says.

It wants the government to rpovide more engineering places at university, and it has started its own scheme for an India-wide certification of IT qualifications.

Pressure on turnover

The tight labour market is already taking its toll on the industry.

The big three Indian software companies alone (Infosys, Wipro, and TCS) are looking to hire 100,000 new graduates this year, as their businesses continue to grow by 30% annually.

The problem is not so much hiring the skilled IT workers - Infosys gets 1.4 million applications a year, and can pick and choose - as retaining them after they have started.

As foreign multinationals continue to flood into India, the competition for experienced IT professionals is heating up.

Companies such as IBM Cap Gemini and Accenture, the main rivals to the Bangalore tigers, plan to transfer the bulk of their worldwide operations to India in the next few years and are desperate to hire staff.

Turnover rates at Infosys and Wipro are about 12%-15% a year - still lower than the Indian average, but rising steadily.

And to retain existing staff, Wipro has had to raise wages twice this year, by more than 20%.

Wipro's chairman, Azim Premji, says he is not worried - his company offers better opportunities than the foreign multinationals.

But industry analysts wonder whether the rising wage bill will eventually make Indian software companies uncompetitive in the world market. After all, lower labour costs are what gave them their initial advantage.

The Indian companies answer that it is their global production systems and their skills, not low wages, that give them comparative advantage.

But they are also hedging their bets.

All the Bangalore tigers have set up development centres in China, where they can employ software engineers for considerably less than they are currently paying their Indian staff.