Monday, December 12, 2005

India running out of IT staff?

I’ve not said much about “offshoring” in this blog to date. In part that has been because while I broadly agree with the theory behind it most of my experience with it (e.g. call centres in India) has been very negative.

The other reason has been a deliberate decision to avoid a controversial subject. Controversial because those who read this blog with a business hat on see it differently from those who read it with a programmers flat-cap on.

However, a report in today’s FT caught my eye so its time to talk about this.

According to this report India will have a shortfall in skilled IT staff by 2010 of 500,000. This will come as a surprise to some but its something I’ve suspected would happen for a while. The report goes on to say that only a quarter of graduate engineers in India are actually employable by the industry - I wonder what the figure is in Europe and the US?

Add to this infrastructure problems (lack of office space, roads, power, airports) and suddenly the Indian IT sector doesn’t look that rosy.

So does this mean IT staff in the west can relax? Probably not, but there is no reason for panic.

Personally, I’ve never bought into the “India will take all our jobs” argument for a number of reasons...

  1. Not all jobs are suitable for offshoring: as rule of thumb, the closer you are to the customer the more difficult it is to offshore your work. Some banks pay IT staff a premium to sit next to traders on the dealing floor, if 50 meters makes that much difference think how much 5000 kilometres makes.
  2. Offshoring is not risk free: for a start you can’t see what your people are doing let alone look them in the eye. Then there are the external risks, for example, India nearly went to war with Pakistan a few years ago - and both are nuclear armed. Sure we had bombers on the streets of London this year but we’re talking an order of magnitude.
  3. Law of supply: India (plus China, etc.) may have a lot of people but how many of them can actually work in IT? And how many of them are really good? Over time the price of good people will increase making offshoring less attractive. Already Indian call-centres suffer from high staff turn over rates.
  4. Law of demand: if there is a vast movement of jobs from Europe to India we should expect to see prices in Europe fall, again this makes offshoring less attractive.
  5. There are only a few good programmers: It is widely accepted that the best programmers are few and far between. The best are 10 or even 20 times more productive than the average. This cuts both ways: if you want to employ the best can you afford to ignore those who live in Bangalore not Birmingham? And, if they are 10 times more productive then surely you can afford to pay them 10 times more irrespective of where they live?
  6. India needs developers too: As India develops its own demand for IT people will increase - Indian businesses need IT staff too - the faster we help India develop the faster demand will rise.
  7. There is more than enough work to go around: as my last point suggested this is not a zero-sum game. IT has a long way to run yet, there is a lot more software to be written, the more we write the more opportunities we see.
  8. IT is really about change: You might be able to write software in 5000 kilometres away but you can’t follow through on the corporate change programme from that distance. Introducing change has to be done locally. Western companies will increasingly look for IT staff who understand that IT is not the end but only a means to an end.

Does all this mean your job is safe? No
Does all this mean my job is safe? No

It does mean that as an industry there is plenty of work to go around.

Finally, and this should really be the first point: It is morally wrong to stop work going to India or elsewhere. To stop work moving would be like saying:

"We in the rich west are happy to send you aid for development, and when you are hit by an earthquake, famine or Tsunami. But, we want it to stay that way. We don’t want you becoming rich yourselves."


In the long run it is in our interest to see India develop. They are a market too. And a prosperous India will be a safer India (no nuclear wars) and a more environmentally friendly India.