2006-01-15

Is India's Outsourcing Boom Sustainable

Danger Signs Ahead
A chronic shortage of skilled workers is threatening India's outsourcing industry. Call centers and outsourcing firms are still growing, but the pool of suitable workers is quickly drying up.

India employs about 350,000 people in the outsourcing industry and adds 150,000 new jobs each year. But filling those vacancies is proving to be a nightmare. At this moment, the industry needs to hire around 9,000 people but can't find them.

The crisis is becoming worse. The industry faces a shortfall of half a million workers in a few years' time, according to a study this month by McKinsey & Company and the Indian IT body Nasscom.

Increasing labor costs have naturally accompanied the labor shortage, and with additional concerns about India's infrastructure and the quality of education, it is increasingly unclear whether India can maintain its leading position in the outsourcing market.

Enter China

China has quickly become a force in hardware production, but has not yet established itself as a strong provider of outsourced software services. Outsourcing prowess is a necessary element for China to emerge as a high-tech force.

China's government and industry are trying to learn from the India experience, and ultimately to improve on the model. Infrastructure concerns are minimal: there has been a huge number of new infrastructure projects needed to build a strong technology industry over the past decade, as well as improvements and modernization of educational facilities.

Also, the Chinese government is investing heavily to promote high-tech. It helps that China churns out more than 300,000 graduates with technology degrees each year. The goal is to move from low-end to high-end services, and for some companies with the size and experience to compete directly with India's software giants to emerge.

Source: ABC News; Investor's Business Daily

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