Tech Sector Suffers as Wages Surge and Multinationals Splurge
By JOHN LARKIN
Staff Reporter of THE
The Wall Street Journal, 1046 words
January 4, 2006; Page A9
MUMBAI -- India, despite its reputation as a bottomless well of back-office talent ready to scoop up American jobs, is having an increasingly difficult time finding qualified workers to fuel its booming services sector.
The cross-sector crunch is especially worrisome in the technology industry, where wages are rising 15% a year as call centers and software firms throw money at the increasingly shallow pool of youngsters who can hit the ground running. Consulting firm McKinsey & Co. says
Even if companies continue to find the talent they need in the near term, the rising wage bill is a troublesome long-term trend for
"There are huge numbers of fresh [university] graduates who are just not hirable," says Anand Saraf, managing director of Iqura Technologies, a software firm in
At the heart of
To be sure, some businesses are as yet untouched by the shortages. Marquee local software firms such as Infosys Technologies Ltd. continue to attract more than enough skilled applicants. The rest -- including large U.S.-based competitors -- have little option but to pay high wages to attract employees in fished-out talent pools in big cities such as Mumbai and
The demand for well-trained workers has prompted an explosion in wages for the most experienced Indian personnel. And attrition has reached epidemic proportions as workers job-hop to better salary packages. Pay for tech and banking executives, airline pilots, and engineers -- all sectors experiencing huge growth -- jumped between 25% and 30% in 2005.
Rather than hire ill-qualified graduates, companies are devising strategies to cultivate and retain valued workers. Software firm Sierra Atlantic, of
Competition for talent is fierce. Larsen & Toubro Ltd., the subcontinent's largest construction company, loses 800 experienced engineers a year to software firms and multinational engineering companies, despite having doubled salaries over the past couple of years.
In response, the company has launched a global head-hunting campaign to woo back staffers lost to foreign rivals by offering salaries of as much as $100,000 -- a huge sum in
"Unless we drastically look at paradigm shifts in education, we won't get the numbers [of workers] we need for the future," says S. Ramadorai, chief executive of
Politics is also shortchanging students, says Shiv Visvanathan, a professor at the Dhirubhai Ambani Institute of Information and Communication Technology at Ahmedabad. Many state colleges, he says, are controlled by local politicians who arrange for the necessary licenses and get a cut of revenue. As a result, the emphasis is on making money rather than on academics. Some colleges can't afford library books and don't have enough classrooms.
The Indian government has tried to make headway by launching programs to improve tertiary education. Some experts believe the system eventually will deliver the teaching needed to equip young minds for the global economy. But change isn't likely to come quickly.
In the meantime, an army of unemployed recent graduates, estimated at more than five million, is expected to grow. Mr. Saraf, whose firm Iqura also has an executive-search business, says most IT firms now won't touch anyone with less than two years of experience. He says he regularly receives graduate applicants who have learned outdated computer languages.
"I've even had to tell [new hires] they can't wear slippers to business meetings," he says.