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Tuesday, September 06, 2005

Indian Offshoring Is Not Just Bangalore Alone

MGI cautions that India's vast depth of resources is smaller than it seems once their suitability for is considered and finds that in key offshore locations, constraints on the supply of talent already exist. Other low cost countries, are gearing up ( I am not sure how much would these would add up to? - each one of them comes with their plus and minus and largely less attractive in aggregates - supplementary/complimentary roles - yes, replacement on same/better terms - NO) to challenge India's lead. Lets look at some of the key issues discussed article and some views on those. Sometimes I am amazed at the disconnect between reality and myth (like there are only 6 best engineering institutes in India!,Making Banglaore synonymous with Indian IT etc.)I do not subscribe to the pessimism/undue caution brought forth and it is not the end of the game as it looks:
- Depth Of Experience: In 15 years of offshoring, the country has been aggressively expanding its higher-value services—proof points exist in business application innovations,product development, and BPO and has developed a stable of world-class IT services vendors that can save foreign companies the trouble of setting up their own offshore centers. A large supply of qualified talent exist in areas outside IT, such as R&D, finance and accounting, call centers, and back-office administration and the future trend seems to be that Across every industry spectrum, there is potential for knowledge work to relocate to India.
- Size Of The Pool :India's pool of young university graduates is the largest of all 28 countries MGI has studied and is 1.5 times the size of China's and almost twice that of the United States. This huge number of young graduates is topped up by 2.5 million new ones every year.
- Quality Of Expertise : Global resource managers with experience in India praise the cultural fit and work ethic of Indian employees but would still, on average, consider employing only 10 to 25 percent of the country's graduates—a higher proportion of suitable graduates than China produces but only half that of Central Europe. The quality standards may vary across different institutions. (My Take – Talent quality is a myth –Look at the successful companies running offshore business and look at the proportion of executives from so called high quality institutions – answer lay there)
- The Talent Mix: Proportion of engineering degree holders may be less compared to the levels of China & Germany. India could face an overall shortage of engineers in the next few years. Significant shortfalls of talent are also expected in the field of business process offshoring, driven by the likelihood that demand and job growth will increase much faster in this industry than they will in IT services over the next three to five years.(Initiatives like this would provide the solution.)
- Flexibility: Indian graduates are highly mobile compared with those from other emerging markets. Concerns exist on middle management scarcity.( Look at numbers getting certified in specialised courses like PMP – answer lays there).
- Expertise Building Frameworks: Private providers, such as the university-affiliated software-engineering schools of Oracle and Satyam, have driven an explosion in the number of graduates in IT-related disciplines; both private providers and government-funded institutions have contributed to the increasing number of potential candidates for business process jobs. More of such things may be needed.
- Locations: To some extent, offshoring companies have created difficulties for themselves by crowding into the same places. Although clustering creates advantages at first, they soon dissipate if demand for talent overwhelms the supply and if infrastructure investments don't keep pace. (DO NOT EQUATE OFFSHORING WITH JUST BANGALORE – THAT’S A MYTH/HYPE – Agreed that Bangalore has a pioneer status – but it is Chennai, Hyderabad and to a small extent Pune & Calcutta that are showing lot more activity today and it would be Coimbatore, Mangalore and Indore that would be the centers)
- Cost : MGI research shows that India has the lowest labor cost for university-educated employees of the 16 potential offshore countries studied (roughly 12 percent of the US cost, on an hourly basis). India's graduates also work the longest hours—on average, 2,350 a year, as compared with 1,900 in the United States and 1,700 in Germany. Projections show that average wages for young professionals in service jobs in India probably won't exceed 30 percent of US levels, due to competitive pressures:
- Things To Do:
- A. To stay at the cutting edge of offshoring, India must invest a lot more in its infrastructure - and a lot faster.
- B. For back-office activities such as finance, HR, analytic and modeling services, and call centers, projections indicate that India will have enough suitable labor to meet projected demand over the next five years, but these need to be made stronger in numbers and a good PR machine should work on this becoming clear to a lot more.
-C. Making India shine – has the key themes listed out – simple, direct but impactful.
-D. Recognise the changing nature of offshoring and gear up for that - as in other streams where countries move into value added segments with maturity. India is uniquely positioned for that and such endeavours open lot more avenues for growth and opens up innumerable opportunities.
- E. Create a Book Of Myths of Indian offshoring that analysts always write about and make them realise that reality is different from pulpwork.

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