The Pace of White-Collar Outsourcing

How rapidly will outsourcing of U.S. white collar jobs proceed? The consensus bet is 300,000 a year, but it all depends on how rapidly the English-literate populations of emerging markets expand:

India%u2019s Outsourcing Industry Is Facing a Labor Shortage - New York Times : February 16, 2006 By SARITHA RAI MUMBAI, India, Feb. 16 — India’s leadership in global outsourcing may be in jeopardy unless it increases its supply of skilled workers.... Experts... said Thursday that an incipient skills shortage was the biggest threat to the industry’s blazing growth.... Pramod Bhasin, chief executive of Genpact, a back-office outsourcing company once owned by General Electric, set the tone when he said, “If the talent in India is scarce, we will go wherever the labor pool is available.”

Lower-cost centers like Eastern Europe and China could become serious rivals for outsourcing business from Western multinational companies.

Until now, corporations mainly looked to India to do work from customer support to writing software code to designing chips. But the supply of India’s famed “skilled, low-cost, English-speaking” work force may not quite match the sizzling demand.

India’s $23.4 billion outsourcing industry accounts for most of the country’s software and services industry, which makes up nearly 5 percent of gross domestic product. The industry employs 1.2 million workers, has sparked a consumer revolution in India, and is accelerating at more than 30 percent a year.

On the sidelines of the Nasscom meeting, B. Ramalinga Raju, chairman of India’s fourth- largest outsourcing company, Satyam Computer Services, said that India produced three million college graduates every year, including nearly 400,000 engineers. “But most of these are uncut diamonds that have to go through polishing factories, as the trade requires only polished stones,” Mr. Raju said.

In a country of 1.1 billion people, raw talent is plentiful, he said, but not all of it is market-ready.... The supply shortfall is even more acute in mid-level jobs, like software engineers. Salaries in this segment are rising an average 20 percent a year, and in some segments even 50 percent annually, compared with 5 percent annual raises for software engineers in the United States.

“The irony is that while the outsourcing industry partially fueled an economic boom amongst the middle classes, the growth has now spilled onto other areas offering ambitious young college graduates an array of job options outside of the outsourcing industry,” said M. S. Krishnan , professor of business information technology at the Stephen M. Ross School of Business at the University of Michigan....

Outsourcing companies are taking matters into their own hands to meet mid-level skills shortages by setting up vast, dedicated training centers. Tata Consultancy Services... has a large training center in Trivandrum... its nearest rival, Infosys Technologies, has a training campus in Mysore.... “At any given point in time, there are 4,000 people in the pipeline at Infosys’s training center,” Mr. Krishnan said.

Many companies believe the skills deficit will only grow. “We are in the people business, and the situation will become more challenging in five years,” said Amitabh Ray, director of global delivery, IBM Global Services India....

The situation is much the same in the back-office and call center jobs: of 100 college graduates applying, only 8 are immediately employable. Another 20 require considerable training to be hired, according to Nasscom data...