The Future of Outsourcing in India

aaditeshwar writes "Economist has an article on the current and projected state of outsourcing IT and other business processes to India. The biggest problem seems to be that the talent pool of skilled workers will not able to keep up. Currently there are about 700,000 people working in IT and outsourcing, which is likely to grow up to 2.3 million by 2010, but only 1.05 million new graduates will qualify from local colleges in the next 5 years leading to a shortfall of 500,000 workers! All this despite the fact that almost 2.5 million students graduate in India each year." From the article: "In IT the growth in Indian exports is expected to come both from the software market, and from 'traditional IT outsourcing'--such as the remote management of whole systems, a market now dominated by the big global IT consultancies. This is expected to rise from 8% of Indian sales now to about 30% in 2010, while software-development's share will fall from 55% to 39%. In business-process-offshoring, the big industries will remain banking and insurance. But rapid expansion is also expected in other areas, like legal services."

Comments

Next Target

[Tiberius_Fel]

When they run out of people to hire in India, or when workers in India are expensive relative to workers in some other country, they'll move on to that other country - it's pretty much as simple as that. The quest for the most effective labour for the lowest price will never end.

Re:Next Target

[stinerman]

The upshot of increased freedom of trade, is increased wealth overall.

Up to a certain extent. First, many countries we outsource to have little to no labor laws. Workers are forbidden to collectively bargain with their employers, which gives employers the upper hand in dealing with "problem" employees who say that working 80 hrs/wk for $.50/hr just isn't cutting it.

Second, with increased wealth comes increased demand for energy, as energy consumption directly correlates with wealth. Everyone always likes to say that globalization and freer markets will allow people in all corners of the world to have the same quality of life as Americans. As of now, we don't have enough energy to allow everyone to live like those of us in 1st world countries. Hell, we can't even find a way to feed everyone, much less generate electricity for everyone. Of course, one would hope we can find a way to meet the world's increasing energy needs, but oil production is nearing its peak, and we've not found any viable alternative. Even if nuclear fusion came on-line tomorrow, the fact that Wal-Mart sells $10 t-shirts is because of suppressed wages in the countries that make them. To put it another way, how much more do you think your new P4 processor would cost if it was fabricated in the USA?

Re:Why lump " IT and outsourcing" together?

[mcg1969]

I think that the point they are making is that India has demand for IT workers internally; that is, not originating from a foreign company. Obviously, every IT worker that works on an outsourced job is one unavailable for "internal" use, and vice versa.

Re:Lot of assumptions in prediction of "short fall

[RevMike]

As far as I know (from cousins, friends, and general chat from India), there is still a strong demand for the outsourced jobs. Almost tens of resumes per open position, so the prediction of "short fall" looks to be based on shaky ground.

I go through at least 40 or 50 resumes in the US (Metro NYC area) to find one person worth hiring. And these are resumes that have been supposedly pre-screened by headhunters. Resume counts mean nothing if those tens of resumes represent poorly skilled people.

Re:Meanwhile, Bill Gates

[Travoltus]

[To add insult to injury, Americans companies are not willing to train people on the job. There is no job training, nor employee loyalty in the US tech sector.]
Oh, that is very true. I've interviewed many people to work for me and my boss has ordered me to turn them down in favor of waiting for more experienced people to come along. When that doesn't happen, THEN we hire the best inexperienced one in the bunch.

But now, as far as I've seen, this is true of all sectors.

Any job, even retailers like Target, demand years of experience first. Even if you have a degree, they want experience, too. Having a degree only means you are more competitive with other experienced workers.

No job except the lowest end of food service will ever hire someone without experience now.

Re:Education?

[kanad]

I was an IT worker in India. I am Indian. Indian IT companies recrit all sorts of engineer i.e civil, mechanical, electrical, chemical etc apart from comp sci. Since most engineering students have atleast a common denominator of traits like analysis, rigourous coursework, maths etc. the IT companies know that they can train them in sofwtware with relative ease. Of course the CS grads get the more better technlogy to start with (says database. java etc) while the non - CS ones may have more maintenance, mainframe, testing kind of job to begin with. Most IT companies take grads and subject them to 1-3 months intensive introductory software training courses just like a mini college course. Check for example the infosys global education centre Also large Indian companies are in turn opening offices in China , Hungary etc to outsource the outsourcing.

Re:How was it working out though?

[jcr]

Every outsourcing story I've heard has ended in disaster, overrun budgets, wasting thousands of dollars

Actually, that's the case for most development projects, outsourced or not.

-jcr