Troubling Signs for Indian Tech Outsourcers
If you are an investor in one of the many U.S.-listed technology outsourcing giants such as Infosys, then I have some bad news for you: they are no longer the cherished destination for the brightest and the smartest in India. Instead, they are being viewed derisively as “code factories.” What gives? Read on…
One of the most amazing things you notice about Indian newspapers recently is the lack of technology headlines. Instead the focus is on telecom and manufacturing and organized retail. This is in sharp contrast from a few years ago, when I encountered newspapers proudly chronicling the tech outsourcing boom while visiting the city of my birth.
A few reports today in the local media, when taken together, seem to be like the proverbial dark cloud hanging over the Indian technology sector that sparked off the local economic boom. The Hindustan Times reports that an increasing number of employees who work for business process outsourcers (BPOs) are leaving their jobs and heading to the business schools. Nearly 10-to-12% of new management students came from the BPO industry. The grueling hours and hard life with few prospects to rise to the managerial ranks are the main reason why many are looking to upgrade their professional lives.
The Times of India today is running a piece called the Myth of The Indian Programmer, which has some pretty startling revelations. Apparently, last year only 10 of the 574 graduates of IIT Powai joined the tech outsourcers, with a majority opting for the likes of Google.
The article argues that a lot of churn at companies like Infosys is a result of dissatisfaction with being just coders and engineers are switching to jobs with bigger challenges. A Tata Consultancy Services (TCS) executive acknowledges that the outlook is gloomy. The question then is that if the top outsourcers cannot attract the best and the brightest, then how are they going to stay competitive?
The third piece, again in the Times of India, points out that the IIT system is facing a resource crunch, which could mean even the brightest minds may not be able to get the resources they need to become world-beaters.
Maybe I am being pessimistic, overcome with the idea of a 22-hour journey and leaving my family, but something tells me that my pessimism may not be completely unfounded. If you are a professional from the “outsourcing” business, please let me know how you feel about your business, and give us your outlook. Comments are open.
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I ran a Banagalore office for 3 years and then endedup closing it late last year and moved all the work back to US.
The biggest problem is lack of quality tallent. Each job advertisment will bring in like 1000 resumes and even not one guy will be good.
Granted their are very good developers in India, but they either work for Google or they want a salary that is equal to what is paid in US.
So its a moot point running a offshore center when your end to end cost is same as what its here in US.
Jay
Even four years ago, I don’t remember any students from the leading schools (like IITs) excited to work for the large system integrators like TCS, Wipro or Infosys.
Very interesting piece, and a perspective that needs to be discussed seriously. Please visit my blog “Arguing India” for a full discussion (argument?) on the issue.
Based on results from an outsourcing industry survey, ‘Eyes on Electronics Outsourcing Industry Survey’, (results: see http://www.VentureOutsource.com), India rated among one of the highest sought after destinations by executives when outsourcing electronics product design. (Some countries India ranked higher than include Russia, Thailand, Mexico)
However, with regards to BPO and outsourcing of electronics design, there is less supporting infrastructure required for these business models than, say, that needed to support a manufacturing base which, contrary to what many people might want to believe, India has not yet been able to create an adequate manufacturing-based supporting infrastructure. The manufacturing technology infrastructure currently in place in India today has been largely due toforeign direct investment (FDI) of MNCs doing business in / with the Indian technology market sectors.
In order for the world’s last great emerging economic market to thrive as a technology powerhouse, she must pull together the forces which can help make one of her dreams become reality, which involves constructive dialogue among:
One challenge to this may be where some say there is a great amount of corruption in Indian society and government. On this note, In his book, The Corrupt Society, Indian author Chandan Mitra compares Indian society to that of one of Niccolo Machiavelli’s second-category societies mentioned in the 1505 novella, The Prince. In such a society, Mitra points out that India’s citizenry, while actively participating in the political process through elections, is primarily engaged in promoting its own ambition to the detriment of the common good.
I’d still like to believe odds of success are in her favor.
I don’t quite agree with your pessimism, Om. My company – Dolcera – provides technology and IP (intellectual property) research services to CPG, high-tech, pharma and life sciences companies and we have our offices in Hyderabad. We are growing quickly and hiring regularly. We are seeing the following:
1. IITians (as someone else says above) are anyways few in number. But there are a number of new colleges and universities all around the country churning out better quality graduates than when I graduated 10 years ago. The competition for this talent pool is fierce, but the quality is pretty good.
2. There is a big dearth of talent with “people” and “business” skills. So having more MBAs is not a bad thing at all.
3. This does not directly relate to your point, but there is a decent pool of people in other domains (chemistry, life sciences etc.) that we are able to tap into for our clients in non-tech industries.
Can you please give a link to the “Myth of The Indian Programmer” story? I couldn’t find it through Google News search.
@Jay, I checked out your site ObjectCube, and it is clear your entire customer base is adult-entertainment (aka hardcore porn) sites. I assume you had trouble recruiting talent in India because, talented Indians are a bit, well, squeamish about working on compressing/delivering videos like this. So I don’t know what your experience teaches, other than the fact that porn is not mainstream in India.
@Prateek
The “Myth of The Indian Programmer” story was published in today’s Times of India print edition!
You can find this article at today’s http://epaper.timesofindia.com at page 6 (Bangalore edition.)
These days it’s really hard to find good talent in Pakistan too. People are either moving abroad or asking for US/Europe equivalent compensation. Production houses are sub-outsourcing their work to far-east / Russia for economical labor.
My opinion is that the Indian IT story is not just about labor arbitrage alone. It is a much more complex mix of delivery/domain capabilities at the right price point (as opposed to low price). So anyone who is in India just because of the “cost-advantage is bound to be disappointed. You wont be able to find many people willing to work for you. OTOH, the larger Indian players are doing pretty well in attracting and retaining Indian talent.
It is also kind of bizarre to see this image of “overworked youngsters with no potential for career progression” in the Indian “mainstream” media. Remember that most of Tier-1 Indian IT companies grow at an astounding pace of 30-40% CAGR – in my opinion and experience, this translates to one of the fastest career progression pipelines anywhere.
On the other hand, there is a real lack of good, employable people – most of the people in the job market are just there for the easy-money factor – which probably explains the low career satisfaction figure. India’s public education/health care system is so broken that there is no way to fuel growth figures like this. And that “shortage” is quite evident in the way, Indian players are structuring their deals. No one is reliant on “India-sourcing” alone. Case in point look at the way TCS has structured its ABN-Amro/Pearl deals.
So in short, yes there is a supply-side shortage – but most of the Tier 1 players have sophisticated network delivery models that are not necessarily dependent on India.