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The India Skills Gap
28 December 2006
The skills gap which threatens the IT boom in India
At one time, Somini Fatah fancied being an ambulance driver. That way he could combine his love of the outdoors with his desire to help others. Waiting to reach the correct age was, however, rather tiresome. So, he became a software engineer instead. The job has its similarities he says; sudden death is a favourite habit with IT programs.
According to a survey commissioned by India's National Association of Software and Service Companies (NASSCOM) and management consultants, McKinsey, Somini is one of nearly 400,000 IT engineering graduates that India produces each year.
However, as India's technology companies look to meet the demand in outsourcing, they are coming up against an unthinkable challenge. In a country, once regarded as a bottomless mine of low-cost, ready-to-work English-speaking engineers, there is now a dearth of quality IT workers. India still produces some savvy graduates, but the general competence of their colleagues has become a concern.
"I was one amongst 63 pupils in a classroom and classroom sizes are rising. Added to this is the need to keep companies properly staffed, so although people are leaving when they are two-thirds of a way through their course to get a job, more pupils fill the classroom and learning gets disrupted. It’s not ideal," says Somini, who now works in Britain as a designer for a US-based software company.
The remarkably open NASSCOM study found that, in 2005, just one in four technical graduates were properly qualified to begin work. The remainder, so the report found, were lacking the required technical skills, fluency in English and the ability to work in a team or deliver basic presentations.
The skills gap reflects the narrow availability of high-quality college education in India and the galloping pace of the country’s service-driven economy, which is growing faster than nearly all countries in the world but that of China and South Africa.
As in Somini's case, the software and service companies that these engineers are trained to join provide technology services to foreign companies. Many of these companies are based in the United States.
Software exports worldwide expanded by a third in the last twelve months. Few countries' university systems would be able to keep pace with such demand, and India's is certainly experiencing huge problems. The best and most selective universities generate too few competent graduates, and new private technology colleges are producing graduates of poor quality.
With the number of technology jobs expected to nearly double to 1.7 million in the next four years, companies are scrambling to find fresh engineering talent and to upgrade the schools that produce it. The fear is that India's economy could find itself fighting for life, if western companies pull out of the market and transfer elsewhere – to China, for instance.
Some companies are training undergraduates themselves and offer courses tailored to industry needs and are working to improve the technology and reading matter found in university labs and libraries. They are rushing to get first pick of would-be engineers long before they have completed their course work. And these companies are fanning out to small, remote schools and colleges that few knew existed. India's most successful technology businesses can no longer afford to hire only from the most prestigious Indian universities. Nor can they expect recent graduates to be ready to hit the production line, as most require in-house training of at least two to six months.
Demand is beginning to be felt on the bottom line. Entry-level salaries have risen by an average of 12 to 15 per cent and NASSCOM, which helps companies wanting to outsource workers, forecasts a shortage of approximately half a million employees in the technology sector by 2010. The Retailers Association of India said earlier this summer that its fast-expanding IT industry would urgently need an additional 115,000 workers by December. It was reported in India's media last month that Google was having trouble finding enough Indian workers proficient in the languages and design technologies used in the latest generation of websites.
Jaz Singh-Baines, a freelance recruitment consultant employed by one of America's largest IT hardware firms, admits to feeling worried about the future of the Indian IT industry.
'The pinch is being felt and it could cause problems in terms of how good an investment India is seen to be. Unless we see immediate corrective measures, this industry could fall by the wayside. You have to remember that it is always the bottom-line that company accountants look to.
If the company is failing to meet demand and profit targets, there is a huge danger that the operation may be closed down and transferred elsewhere. India is facing this threat. If the goods are not in the shops, if the consultancy is no good, or if people can't be trusted to write programs properly or design new codes, then we are left out of the water and people are obviously going to shop elsewhere. It is truly worrying."
Recognising that they have to conduct a wider search for talent, one of India's largest software companies has begun a nationwide trawl for its future workers during the last six months. The Tata Consultancy Services (TCS) plans to treble its existing force of 72,000 to try to reach its financial goal of $10 billion in four years' time, which, if it makes its revenues target, will place the company at the same table as IBM Global Services, EDS and Accenture.
The company's executive vice-president of global operations, N. Chandrasekaran, or Chandra as he's better known, says a recruitment drive for the next generation of software programmers and consultants includes travelling to the farthermost outposts of his vast country to find talented students.
"We should not pass up any students; after all, we cannot afford to let talent slip through our fingers. Among these people could well be those who are going to write my Windows 2010. We have to assess how we can help the best students graduate with the best marks. If that means putting money into universities and colleges, then so be it," adds Chandra.
In the past, TCS needed only to advertise at the top engineering schools in the country, because the choice of schools was limited. Among a few select campuses, there were nine further campuses belonging to the Indian Institutes of Technology. Today, the TCS recruitment list includes over 200 institutions, many of them private colleges that have emerged to feed the greed of huge multi-million dollar deals.
The number of technical schools in India, including engineering colleges, has more than trebled in the last decade, according to the All India Council of Technical Education.
A new kind of academic institution, the finishing school, is now emerging to offer students intensive English language training and instruction in technical skills required for the workplace. It used to mean a type of private school that emphasized cultural studies and aimed to complete the educational experience. Now it's one more way for India to nurture future talent in technology arena. To its credit, NASSCOM is inaugurating its own early in 2007.
Part of the skills gap problem is that only a small percentage of India's young go on to higher education. No more than 10 per cent of Indians aged 18-25 go to college, according to official statistics. Even a more fundamental level of education is proving difficult with nearly 40 per cent of people over the age of 15 being illiterate. Ironically, it is becoming even harder to create a robust and continuous pipeline of talent.
Enter Kiran Karnik, president of NASSCOM. After the Association's report became known, NASSCOM decided to address the talent shortage by creating a standard National Assessment of Competence – the NAC. After a pilot project was successfully completed in August 2005, through which 6000 candidates were tested, this month will see 2000 candidates sitting the test first in Rajasthan and then in other centres around India.
"In line with our ongoing efforts to strengthen India's IT-BPO workforce, we initiated the NAC to help tap new talent pools in comparatively remote parts of the country, through a common assessment program. This is in addition to the IT Workforce Development initiative," said Karnik.
But will this initiative be a major means of bridging the distance that stands between India' graduates and the industry's requirements?
"We are hopeful that it will be, because we are putting people through world-class testing, certification and a skill-set which will identify shortcomings. This nation-wide roll-out will create a continuous stream of talent for the Indian IT industry and the country’s leadership position in this space. The qualification will also ensure stabilization of costs in the IT industry by enhancing the supply," he added.
The bigger question in this debate has to do with a possible failure on India's part to properly educate its workforce when more than half of the population is under the age of 25. If India does fail in this area, will it then be left with a large, potentially restive pool of unemployable youth?
India's Commerce Industry does not think so, and it is trying hard to attract foreign investment into the technical colleges and university system. The greatest fillip is, of course, money. Many young, qualified engineers are earning salaries which would have been unimaginable in their parents’ time.
"It is a crossroads for the country, but it is also a golden opportunity which can be easily thrown away if we do not do the right thing. But I feel happy that I’ll be able to return to my country and that people will be better skilled than I am," added Somini Fatah.
It is a hope the major players in India's IT industry will share.
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