A Cloudy future for Indian IT?

The national employability report 2011 compiled by Aspiring Minds revealed a shocking trend- the percentage of ready-to-deploy engineers for IT jobs is dismally low at 2.68%. Even though India produces more than five lakh engineers every year, only 17.45 % are ready to be employed in the IT sector. Revenues for Indian information technology (IT) and business process outsourcing (BPO) services companies is expected to cross $100 billion mark this financial year.

Indian IT Sector

However, there are doubts over sustaining this multi-fold growth due to supply-side constraints like talent availability. The report notes that around 92% of graduating engineers do not have the required programming and algorithm skills required for IT product companies whereas 56% showed lack of soft skills and cognitive skills. To retain its competitive edge, the IT industry requires an industry-ready workforce. Sector-specific skill shortages have emerged with middle-management personnel possessing little domain experience.

The IT/BPO sector also faces threat in the form of competition from other offshore destinations who are ready to dislodge India. A number of alternative offshoring locations like Philippines, Eastern Europe, Latin America, and China are emerging as viable options for BPO delivery centers.

Philippines has superior English language and soft skills for customer service operations especially for US buyers, Eastern Europe offers language and time-zone advantages for European buyers.


These competing destinations also offer lower cost, provide quality talent pool and are offering fiscal and regulatory incentives to lure buyers away from India.

Mid-tier IT companies are facing problems of their own. Apart from over-dependence on few clients and increasing attrition, they are also plagued by non-availability of talent. Since the sector biggies get preference in campuses during recruitment, mid-cap firms lose out on top-quality talent. This has impacted their ability to execute projects effectively.

TOP TIERAlso, the emergence of cloud computing has allowed companies to cut fixed costs in terms of buying software or high capital expenditure on IT infrastructure.

Even as cloud computing is yet to address key issues like data security, it has made crucial inroads into traditional outsourcing and the days of companies hiring thousands seems to be over as SECOND TIERthey no longer have to maintain assets such as servers and software.

Even as we dissect the industry on key parameters like order pipeline, demand outlook, decision-making cycle, client IT budgets, pricing power and so on, it is crucial to address the structural issues that plague the IT industry if it is to continue as the blue-eyed sector of the Indian economy.

Instead of resting on its laurels as one of the world’s top providers of IT and BPO services, companies must build new skills in its workforce to maintain its competitive edge and innovate.

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