Outsourcing: Evalueserve Interview (Part 9)

By guest author Tony Scott

India’s War For Talent

Tony: Do you see talent constraints in India creating a problem for staff outsourcing firms?

Alok: In India, I think that outsourcing in general is less likely to become saturated because of the labor cost arbitrage issue, and more because in spite of the fact that the number of colleges and number of graduates in engineering are increasing at 14% to 15% a year, that increase in the supply of talent still will not be able to handle all of the outsourcing demand, because that’s also increasing by 14% to 15% a year. That will mean that the growth of IT outsourcing for export services from India is going to be at most 14% to 15% a year.

Tony: Of course there is a domestic growth challenge in India now as well. As major Indian companies or multinationals that are operating in India need that kind of talent and those kinds of services, that is going to drive the demand for the best and brightest Indian grads. And like any other place in the world, most people will prefer to work in situations where they can work normal hours rather than be forced to time shift to work in the middle of the night.

Alok: Exactly – it may come down to even 11% growth. Right now there is so much latent demand in India. One segment is of course the multinationals that are operating in the country, but then there are all these government companies and the public sector undertaking giant IT transformations, such as the State Bank of India. They had almost zero IT connectivity and IT productivity in 1991. Over 17 or 18 years, productivity per person has increased by a factor of 16. We were just doing some research on it, and we believe that it can go up another 80% or so. So productivity has gone up by 1,600% over 18 years, and we expect it to grow another 80% over the next five years.

Tony: Wow – that’s huge.

Alok: State Bank of India is in fact is one of the more forward-looking public sector undertakings, but there are so many of these projects at the state level and at the federal level – all of which will require these talented graduates who are currently working for outsourcing companies serving non-Indian projects. Then of course you have the private players like telecom companies, which also require IT professionals.

Tony: How are the Indian government and Indian industry hiring all the talent they need?

Alok: In some instances, the people who have the skills that are required for export services are too expensive for domestic purposes, and they are acquired for different skills, mainly their English. For export services that’s what is important – fluency in written and spoken English. Only about 25% or 30% of those who are graduating have the level of English that would work well in an export services environment, and I don’t think that’s going to change that much over the next few years – and that is going to be a huge constraint.

This segment is part 9 in the series : Outsourcing: Evalueserve Interview
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