India's Outsourcing Boom Runs Into Trouble

Dec. 24, 2005 — -- A chronic shortage of skilled workers is threatening India's outsourcing industry. Call centers and outsourcing firms are growing fast, but their human resources employees despair because most of the young Indians they interview are, they say, "unemployable."

Some people in the IT industry have said that only one in 10 graduates is worth taking on. "Just look at their English," fumed a frustrated Mumbai-based call center manager as he waved around letters written by employees. One read: "As I am marrying my daughter, please grant a week's leave." Another said: "I am in well here and hope you are also in the same well."

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 set to worsen. 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.

The specter haunting the industry is that it could lose its leading position as the world's "back office."

"If the industry has to go on paying higher and higher salaries to retain the staff it has, costs will rise and India will lose its biggest advantage -- cheap labor," said Saurabh Wig, a former call center sales manager.

If the industry fails to recruit workers at reasonable wages, India will lose orders to countries such as the Philippines and China, according to Nasscom.

With half of its 1.2 billion people under age 25, how can India possibly be short of workers? The problem is not quantity but quality. Many of the 3.6 million graduates churned out every year by Indian universities are considered mediocre.

The Nasscom-McKinsey report confirmed the experiences of HR executives. It said that only about 10 percent to 15 percent of eligible workers are fit for employment in the offshoring industry. Fluency in English apart, employers complained that graduates lacked computer skills, the ability to reason clearly, solve problems, think critically, analyze, work in teams and think creatively.

The Confederation of Indian Industry said that what's taught at universities is not what industry needs. This is why the Indian government has set up a "Knowledge Commission" to improve Indian brainpower.

Sam Pitroda, who is based in Chicago but visits India regularly, is the chairman of the commission. One of his tasks is to overhaul higher education from top to bottom. "About 80 percent of what is taught in Indian universities is obsolete. A professor boasted to me about how he'd used the same notes for 20 years. Think how much the world has changed, and he hasn't updated his notes." said Pitroda.

The labor shortage, however, is good news for foreigners. Disgruntled British and American workers who have seen their jobs outsourced to India could get them back -- with one catch. They need to move to India where their English and their accents will be an asset.

"When foreigners take calls from their respective countries, it helps that they know the culture of the person they are speaking to. That can often be the differentiating factor between a successful Indian outsourcing company and a failure," Avaneesh Nirjar, chief operating officer of Hero ITES, an outsourcing firm.

Young British graduates just out of college and looking for a year's travel and work experience are already taking jobs in New Delhi, Bangalore and Bombay. So are British call center workers looking for a change?

Currently, about 30,000 to 50,000 foreigners work in the outsourcing industry. But a World Bank report says that by 2009, up to 16,000 of those jobs will be filled not by Indians but by Britons.

It's estimated that, apart from fluent English speakers, the outsourcing industry will also need 160,000 professionals with European languages by 2010. Only 40,000 Indians are expected to have this specialization. The remaining 120,000 jobs will have to be filled by Europeans or Americans.

At the New Delhi offices of Technovate e-Solutions, more than 100 foreigners from nine nationalities work alongside 900 Indians carrying out the sales, telesales and booking work for e-Bookers, a European online travel agency.

Tea Westerlund, 35, from Finland, said she came for the challenge and experience of a new culture.

"This experience will widen my career opportunities in the future. Most people in Finland tend to stay there, so it will be a big plus for me to have worked here," she said. "In the meantime, I'm being looked after and having a fantastic time."