BANGALORE, India (AFP) – Rising wages and a shortage of skilled workers threaten to blunt the competitive edge of India’s flagship 48-billion-dollar information technology industry, experts said.
Rivals such as China and the Philippines are set to challenge India’s dominance, which is also being eroded by IT employees jumping jobs for higher pay, a rising rupee and deficient infrastructure such as telecom connectivity, roads and ports.
“These are issues the industry has to deal with in a globalised world,” Kaushal Sampat, chief operating officer of the Indian unit of Dun and Bradstreet, said.
“You can’t look just at the positives, thump your chest and say you are the champion.”
“For every positive, there’s a negative,” Sampat, 36, said in an interview in Bangalore, India’s Silicon Valley.
Dun and Bradstreet, the New York-listed provider of information on companies worldwide, released at the weekend its first report on India’s information technology industry, which has risen in the past decade on the coattails of software firms such as Infosys Technologies, Wipro, Tata Consultancy and Satyam.
The appreciation of the rupee, which rose last week to an 11-year-high against the dollar, employee turnover rates as high as 25 percent and a shortage of skilled workers estimated at half a million by 2009 as wages rise 15 percent a year are the key risks, said the report.
“Limitations in domestic infrastructure and competition from other global players offering manpower at low cost like China, Philippines and Vietnam can (also) have a negative impact on the performance of IT companies,” it added.
These factors are countering positives such as worldwide growth in IT spending, which is forecast to rise at 7.0 percent annually to 2010 to exceed two trillion dollars, and the opening of new markets in Europe.
V.K. Magapu, chief executive of L and T Infotech, an arm of Indian engineering firm Larsen and Toubro, said half-a-million people were employed by IT companies when the industry’s annual turnover was 14 billion dollars, less than a third of the current level.
IT firms will need an additional 1.6 million software programmers and other engineers to raise combined revenue to 72 billion dollars in the next five years, Magapu said at the launch late Friday of the Dun and Bradstreet report.
“The resource crunch will be truly felt when one large IT multinational comes to India and says I want to hire 20,000 people in the next six months,” he said.
India’s IT talent pool and wage costs that at one point were a fifth of those in the US and Europe have attracted global companies.
IBM has announced it will invest six billion dollars in India in the next three years, Intel wants to spend more than one billion dollars, Cisco 1.1 billion dollars and Microsoft 1.7 billion dollars.
Typically, 50 percent of the spending by IT companies, including those in software and related services, business outsourcing and computer hardware, is on wages.
In the 1990s, Infosys, Wipro and other Indian IT companies leveraged on their then low labour costs and plentiful supply of skilled workers to win business from overseas customers who contribute more than three-quarters of the industry’s total revenue.
But now with a shortage of such graduates, the country needs to make a more difficult transition of training arts and commerce graduates in technology skills, said Magapu.
In the US, an unsuccessful aspirant for an engineering course may opt to become a plumber whereas in India, he or she would opt to graduate in another subject, the executive said.
“Our graduates are not incapable of programming (software),” Magapu added. “But you can’t convert a plumber into a programmer.”