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Troubling Signs for Indian Tech Outsourcers

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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.

49 Responses to “Troubling Signs for Indian Tech Outsourcers”

  1. For outsourcing chat, email or back-office support

    If you are considering offshoring your processes, or would just like to know more about the various BPO / KPO services that can be outsourced to us in India, kindly contact us and our customer service representatives will get back to you soon.

    For outsourcing chat, email or back-office support, visit the website:

  2. the real crux of us tech or any growth is their vc community, angel investors. india lacks these kins of funding (easy) opportunities. the issue we r facing is lack of leadership skills and trust in indian managers. after being in usa for 10 years i think we have amazing brains but lack leadership but lack the proper channel to divert these brains to. why not we have a product developmentcompany. i can only name 2 (my limited knowledge), which is selling s/w products outside india. primati (java ide) an i-flex (flexcube). we need to build companies and not bonded hourly labors. that requires leadership without any egos.

  3. I work for a 50 people company. We just got a project competing with infosys. The client, which is one of the largest companies in the world, considered our prior experience in the particular domain. It is very evident that companies like infosys, TCS and global giants like IBM in india actually employ more average skilled workforce. Many people we fire are getting into these companies a lot. I always thought how such jackasses work properly there. They usually will be proud to say that they work for that MNC. But they say they get good alliances. And these procepective life partners are people working in similar companies.

    Personally I enjoy the work I do even if it lacks proper process. I get chance to design softwares in my 20s. Get a chance to work/suggest latest technologies and concepts while earning good bread (with butter). BTW, whenever people impose any process, I feel we are becoming coders than programmers. Programmers do things in their mind: while sitting in a toilet, in dreams and in many numerous other non classified work hours. The software processes in the larger companies just ensures the employee works 8 hours a day. Thats it.

  4. The bottom line is this in my humble opinion:
    The age old adage called “80-20 rule”. 80% of the work is done by 20% of the work-horses.
    This has everything to do with human psyche, ego, technical skills, street smartness, creativity, humbleness, ethical

    perception etc. It is the same if you are working in Google, Microsoft, Yahoo, Infosys, any small startups and even in Indian Railways, NASA etc.

    The other point is that nobody expects you to know what type of intermediate code a certain compiler generates these days. We
    have tools to measure the performance, debugging memory usage and the likes.

    What we are doing is use these tools made by world renowned geeks who produced C, C++, Java, MySQL, PHP, Ruby, Python and
    core applications ( Profilers, Memory Managers, Frameworks based on these mentioned tools). So be humble to your true
    master’s, without them you will not write that much lines of code. Everthing is a library these days. We use them to suit our
    needs that’s it. If you don’t know how to use a library/framework then better do some other worth while things.

    The other thing is that we have only 2-3 world class products that the world knows and uses it — like SQLYog, Tally etc.
    Most of the big Indian IT companies are simply service providers/system integrators where the service/system is already up
    and running and which is made by a handfull of true geeks.

    Another thing is we are wasting around 4 and half years studying the garbage things nobody uses it in real life in our
    engineering colleges and the likes. What we need is to learn the important concepts not just in Engineering ( Physics, Maths,
    Computer Science ) but in Econmics, Marketing, Social and Civic Knowledge, Philosophy, Language Skills etc. Be a better man first and knowledge and skills comes to you.

  5. Or worse, hired “experienced” people who want big salaries, yet know very little.

    First of all, software is such a new industry for India that, for the most part, how can anyone claim that they are really that “experienced” ?

    Second of all, how is being “experienced” in any way correlated with “knowing very little” ?

    In fact, generally, speaking, experienced people, at least those who are good, demand bigger salaries because they are worth it and have proven, over and over, that they can ship reliable products that make money.

    Inexperience, almost by definition, implies less knowledge, but perhaps have more stamina. With less knowledge, you also open to exploitation by those who wish to harness that stamina. Particularly if your only value to the company you are in is dependent on your not being particularly expensive.

    It is great to hear that Indian software are now rising up and realizing their intrinsic value as they gain that experience.

  6. My company, Position2, runs a different kind of outsourcing. We are a search engine marketing firm. We have ops in Bangalore and Mumbai with HQ in Silicon Valley. It’s true that it can be difficult to find good hires. We faced this initially, especially in the tech areas where people want to work for “prestige” brands. Then, there are those that want to stick around for 3 months to hop their way up. Or worse, hired “experienced” people who want big salaries, yet know very little.

    Lately, though we have been more successful at finding people who are tired of being a cog in the wheel of the big firms and want to stick around for a while. They want to do something more interesting that has real tangible impact. What we did was hire FT HR personnel early and focus them on finding and hiring the right profile. Look for smart, creative people, train them on our processes, then have them serve our clients. Then, allow them to innovate but creating new processes and offerings. I’ve been pleasantly surprised at how good people can be if you push them to be more creative. In India you have to give them permission.

    As for those who complain about quality of work, that’s just an excuse for poor management. Remember the 60’s when Japanese autos were considered low quality. Then in the 80’s how there was concern on the Japanese side about American workers at transplants. All people will produce quality when expectations are clear and the processes/organization are there to support them.

  7. Om

    I used to work for a major Indian Outsourcing company and then I immigrated to Silicon Valley when I was moved out of software engineering tasks.

    Since then in the past decade or so, worked in 3 different startups, helped create one from ground zero.

    The difference is enormous. Indian IT companies are a lot like the Indian education system. Very cramped, very limiting and don’t encourage innovation and go by only one thing – pushing more heads towards the customer to make more $ per head.

    My friends who stayed in the big outsouring companies who are now middle managers complain that the talent they get is absymal from 2nd and 3rd tier colleges. The one or two bright individuals in each team will be taxed and burnt out.

    I don’t see any reason for a smart engineer to join any of these outsourcing companies. There are much better big companies to work for and the startup scene is beginning to pick up in India.

  8. Sankate Sharma

    Interesting blog indeed. Unfortunately there are couple of fundamental flaws in the assumptions and predictions of this writer

    1. Infosys, Satyam, Wipro, Patni and HCL are top IT consulting companies in India. They never hire graduates from IIT’s. Most of the IIT graduates (more than 80%) come to US and rest land up opening their own companies in India.

    2. These consulting companies are into business of “software mass production”. They don’t need engineers, and graduates in computer sciences to do coding. They hire cheap labor ($2/hr), train them as Java / Web developers and make them do the coding. Design is mostly done by few architects sitting in US.

    3. I have worked with these top Indian consulting companies for more than 6 years and executed projects for Honeywell, NYSE, London stock exchange and many other fortune 500 companies as an senior developer and project manager. In every project these companies had margins of more than 45%. That’s the reason the stock price of these companies is constantly going up. None of these companies has posted loss since 2001. They have perfected the business model and its difficult to imagine that they will be going out of business in near future.

    4. Companies in India tend to be extremely process oriented, they are process dependent[CMMI, Six sigma etc] and they don’t tend to rely much on people. This is the reason that high attrition rate is not able to make a dent in the profits of these companies.

    Well, this is my perspective, comments are welcome. :-)

  9. The tier 1 service companies are resorting to tier n-1 tactics to retain talent. Its pretty simple, take a fresh graduate and put him in a field that he doesn’t want to be in, then you have him helpless and waiting for an exit, which he wont get.
    Almost every classmate of mine is working on a technology or a domain that he/she doesn’t want to work in. Many of these Tier 1 companies go from employers to gods when they dictate domains and technologies to those ignorant graduates. Their claim – “youngsters cant decide their path , themselves”. Reminds me of arranged marriage. You will find a lot of populous working on mainframe and other extinct technologies like that.
    Its a case of money against people. When you have more than 60,000 employees and are making a billion a quarter, you just dont have the time for employee welfare,which explains all the dissatisfaction.

  10. Om,
    Indian market will go for consolidation, and after few years we will only see 4-5 players having there names in news papers. But market will then shift to more creative sectors in IT, even at local level. By this I mean that there would be rise of small startups, which will mark coming years.

  11. As the other sectors are “sunshine” sectors and have not yet attracted negative press, it may seem that there is an issue or concern. The major concern is that everyone wants to grow a level every year. Retails- Airline and telecom offer even longer hours and lesser growth than BPO’s where an above average performance for over one year almost guarnatees grwoth. Frankly people from BPO’s always went for MBA’s, but most MBA’s do not ensure any management level jobs. In the premier tech institutes people seldom joined domestic IT companies. There is a lack of employable graduates in the country, and people have got used to fast growth.

    85% of people in India are desperate working slaves in an informal economy and their lives oscillate between fear and frustration.

    The remaining are always in search of collusion mostly in the form of caste to enhance their wealth.