Manpower Shortages Still Plague the Industry

Pankaj Jalote

Vice President, Infosys Technologies Ltd.

Electronics City

Bangalore - 561 229

The Indian Software industry has been consistently growing at a rate of over 40% per year for the last many years. Though the total business done by the Indian software industry is only about 2% of the global software business, the industry has firmly established itself globally. World over, India is perceived as the destination for getting software done, and Indian programmers and software engineers now enjoy a much deserved reputation for developing good software. The key reason for this success is that software is perhaps the only high technology area that is manpower intensive, and we had a ready pool of well trained manpower.

There is no doubt that India has a great potential in software, now that its reputation is firmly established. Even if the Indian software industry does not get into the products market, the software services business being so large (approximately half of the total global software business), there is a tremendous scope for further increase for the next many years. India can become the place for majority of the software services business. If we have a goal of capturing a large portion of the software services business in the next decade, then by current figures, the software industry will have a turnover of about $50 billion and will employ over one million engineers! And this is an achievable target, given the size of business and growth potential. And this is without considering the domestic market, which is also likely to grow rapidly in future.

However, this potential is not likely to be realized. And the reason will lie in the poor strategic planning for this industry.  In a service industry, unlike the product industry, there is room for many players. For achieving the kind of target mentioned above, one would expect hundreds, if not thousands, of companies of different sizes, operating at different levels of the value chain, such that collectively most of the market is covered. If there are only a few big players, then it is quite likely that, in order to maximize their own profits, they might move to higher value services, leaving out the other work. If there are many software companies, then the services left out by the bigger players can be picked up by the other companies.

However, given the current state of the manpower situation in India, having a wide range of companies operating at different levels of value chain and offering different services is not likely to materialize, unless drastic measures are taken to handle the manpower situation. It is now a well known fact in the Indian software industry that there is an acute shortage of software engineers being produced by the educational institutions. The big companies have responded to this shortage by setting their own internal training programs and taking engineers from various disciplines and training them to become software engineers.

A small company, until it becomes relatively large, cannot afford to have the overhead of a regular training department within the company. Small companies rely on having a core of some very good people, who carry with them a larger group of not-so-good people by training them on the job so that they can be productive. This model will not work, given the shortage of manpower, as getting the very good core will be very hard – there are only a few very good people who are produced every year. Even if this core can be formed, finding the rest of the people to support this core will get harder every year. First, given our social background which urges individuals to minimize risk at a personal level, most graduates, given a chance, will prefer to go to a larger, more stable company, unless the work is better elsewhere. As most of the companies are in the service business, work wise there is not much to distinguish between them. Hence, the smaller companies will find it increasingly difficult to attract decent graduates. Furthermore, the people they attract, are much more likely to leave within a year or two, once they acquire the necessary experience and skills and become more marketable. The larger companies, due to their brand name, and the paying capacity, will be easily able to attract these people away, not to mention the companies in the US who are always on the lookout for experienced people. In this kind of situation, the management and leaders in a smaller company will spend all their mental energies in just trying to get manpower and retain them, instead of strategizing about the future growth of the company.

One can say that the strategy smaller companies can adopt is to become “niche” players, offering specialized services and excelling in them and thereby attracting business in these segments. New companies may chose this strategy in future, or might be forced to adopt some such method  to distinguish themselves from the larger competitors. However, here again, the shortage of manpower will hit. Developing competencies in some specialized area requires dedicated people who will stay with the organization. With the kind of mobility the shortage of software personnel has generated, building a dedicated team which will develop competency in some area will not work.

Let us get a feel for the numbers involved. The top 10 companies together currently probably employ about 15000 engineers (assuming an average size of 1500 per company). To grow by 40% per year, these top 10 companies themselves will require in the next two years another 15000 engineers, and in two more years after that they will require another 30000, another 60000 in two years after that. Given their organizational reach and the financial muscle, there is little doubt that they will get the best of the engineering graduates. As the top 40 engineering colleges in India will produce about 10000 graduates in all disciplines put together, it is easy to see that in the next few years not only will anyone from these top schools who wishes to join the software industry will be taken by the top 10 companies, other competent graduates from other places will also be taken! A smaller company, with little training infrastructure, has to get people who are already reasonably well trained so that it does not have to invest much in training. In other words, smaller companies will need to have graduates in computer science, MCA, and related disciplines. And the chances of them getting these graduates in reasonable numbers is next to impossible!

So, we will see a shakeup in the near future in the software industry. A dozen odd companies, who can attract the graduates with high salaries and their image, will bear the torch of the Indian software industry. The rest  of the companies, unable to get suitable manpower, which is the basic resource for running a software company, will barely survive, or die, or will be taken over by the larger companies. And larger companies, as they move up the value chain, will leave behind business opportunities in the somewhat lower value segments, with no Indian companies to take them. Perhaps countries like China will move in to capture that business. And if that happens, they will soon start giving competition to even the big players in the Indian software industry. So, it is even in the interests of the larger companies that smaller companies, operating in different value and services segments, exist in India. For achieving the goal of being a majority player in the global services market, it is imperative that along with large companies, many smaller and medium sized companies providing specialized services at different levels of the value chain exist.

If we want to achieve the kind of target discussed above, it is necessary that there should be room for many new companies to come up and grow and operate in different segments. This will necessarily require that the number of graduates available for the software industry should increase dramatically so that the smaller companies can attract a few good graduates and a reasonable number of average graduates who have a reasonable education and experience to do their job. The current education infrastructure in the country is woefully inadequate to meet this kind of demand. The private diploma based programs that have mushroomed in the last many years do not seem to inspire confidence. As these are businesses, their main goal is to make money through training. Hence, they exercise little control over the quality of inputs they take, almost everyone who goes in the program graduates, as they are not in a position to “fail” a student who has paid to get the diploma. Proper training, which is not colored by business needs of the organization providing the training, can only be provided by established Universities and Institutes, and these will need support and incentives to produce manpower in the numbers that are needed. Unless the government, the industry, and the academia get together and sort out together how this kind of growth can be supported, there is little hope for smaller companies.

The need of the hour is creative solutions for education – distance education, internet based education, computer based training, etc. so as to best leverage the resource that is in shorter supply than even the software engineers – competent teaching faculty. The current approach of setting some centers like IIITs in various parts of the country are not likely to make any significant impact as they are not likely to get any competent faculty, and the scale being viewed by these places is still small – a couple of hundred graduates a year. Any strategy to meet this demand must employ more creative methods like distance education, TV based education, etc. so that skilled manpower in large numbers can be created. These things are currently possible as the technology is there and there are a large number of engineering graduates that are produced in the country (each year a total of about 1.5 lakhs students graduate with some engineering degree). Retraining these graduates through newer mediums of education, using the best teaching resources in the country, can start producing dividends in a short time. This coupled with starting of new institutions, which have a longer gestation period, will have a very favorable impact.

However, these kind of initiatives require a concerted effort from the different parties involved, like the way it is done by MITI in Japan. Investments will be needed for these education mediums, and educational institutions and faculty will have to be given suitable incentives to take up these programs. And for these, the government will have to step in, with support, direction, etc. being provided from the industry. As of now, no movement along these lines seem to be happening. Unless the three parties sit down together, understand the projected needs, and draw out a plan to meet the projected needs, there is a good chance that a major shakedown will happen in the near future in the Indian software industry, after which there will be only a few survivors – the big players. Though the big companies will not be unduly affected, this will be a big tragedy for the country and industry as a whole, and a plausible dream of creating wealth in the country through software and India becoming a major software player in the world will stop being a dream even!

NOTE: The author is a Professor at IIT Kanpur, currently on Sabbatical to Infosys Technologies Ltd. The opinions mentioned in this article are that of the author and do not reflect the policies or thoughts of Infosys, or IIT Kanpur.