Outsourcing: India Skills Gap Widens
October 18, 2006 

As its technology companies soar to the outsourcing skies, India is bumping up against an improbable challenge. In a country once regarded as a bottomless well of low-cost, ready-to-work, English-speaking engineers, a shortage now looms. 
India still produces plenty of engineers, nearly 400,000 a year at last count. But their competence has become the issue. A study commissioned by the National Association of Software and Service Companies, or Nasscom, found only one in four engineering graduates to be employable. For the rest, it said, either their technical skills are deficient, their English-language abilities are below par or they have not been taught how to work in a team or deliver a basic oral presentation. 

The skills gap reflects the narrow reach of high-quality higher education in India and the galloping pace of its service-driven economy, which is growing faster than just about any other except China's. Software exports alone expanded by 33 percent over the past year. 

The university systems of few countries would be able to keep up with such demand, and India is having trouble. The best and most selective universities generate too few graduates, and new private colleges are producing graduates of uneven quality. 

Many fear that the labor pinch may well signal bottlenecks in other parts of the economy. It is already being felt in the information technology sector. With the number of technology jobs on track to nearly double to 1.7 million in the next four years, companies are scrambling to find fresh engineering talent and upgrade the schools that produce them. 

Some companies offer training themselves, with courses tailored to industry needs, and upgrade college laboratories and libraries. They are rushing to get first choice on would-be engineers long before they are done with course work. And they are fanning out to small, remote colleges no one had heard of before. 

India's most successful technology companies can no longer afford to recruit only from the country's most prestigious universities. Nor can they expect graduates to be ready to hit the shop floor. Most companies require internal training of two to six months. 

In a handful of instances, as Indian businesses expand their global footprint, companies are looking abroad for talent, mostly to staff their operations in foreign countries. Demand is beginning to be felt on the bottom line. Entry-level salaries in the software industry have shot up by an average 10 percent to 15 percent in recent years. Nasscom forecasts a shortfall of 500,000 professional workers in the technology sector by 2010.