Thursday, June 21, 2007

Money, Markets & Reverse Offshoring

Well hello..
The monsoons have just started and i'm freezing. Thats a good feeling. It's been a few months since the last round of recruitments at the IIMs and other top business schools here in India. And the media, are doing their bit.

Lets start from the beginning. In the early 90's India, especially Bangalore, saw a large number of software and technology firms set up shop. And as the years went by, this trend turned into boom. It would be interesting to note the reasons for this sudden mushrooming of these firms in the country. Could one attribute this to a sudden spurt in entrepreneurs in the country? Perhaps, but the strongest reason for companies to have set shop here would be costs. Back in the 90s, Bangalore was a small city, with empty roads, abundant green cover and clean air. But most importantly, it was an economical place to live in. Cost of living was much lower than the metros, and the government back then was supposedly in favour of tech industries coming into the state. As i'm told, the Govt. of Karnataka offered incentives for companies setting up campuses in the city. Ranging from tax holidays to land and throw away prices, companies had every reason to step into Bangalore. And one of the best reasons, was talent. Bangalore had and still has, a large skilled talent pool, and 10 years ago, putting this talent to good use wouldn't cost firms as much as it would abroad. Thus, it was a wise idea to set up large work teams in the city, and have them work on projects for various international clients. And so was born the concept of Offshoring..

Starry eyed kids would often be overheard saying how they wanted to become "Computer Engineers" when they became "big", even though they hadn't a clue as to what they'd be doing as computer engineers. Coding was what people did, and it was what they were paid for. And in the mid 90s, taking home 8k a month was considered a big deal. Thats how much was paid back then. Compare that to now.

An Infosys fresher would receive compensation to the tune of 3.2lac p.a.. And increments every 6 months to a year would send that figure skyrocketing in no time. And Infosys is just the start. Google, pays 12lac p.a., according to a leading fresher's portal. And it isn't surprising why.

Every year, when a new batch of the IIMs is done with it's campus recruitments, the newspapers carry overly enthusiastic stories on the fat pay packets of these infant future-CEOs.
And though these stories leave all us innocent blog-folk amazed at how intelligent these young guys are, they also tend to have a darker side. Now consider everything i said earlier about tech firms setting up in Bangalore, or even the country. As i had mentioned, costs were low. Skilled people weren't as "expensive" as they'd be anywhere else in the world. And now look at the situation. Poof! The little dream cloud just vanished. The reason these companies came into the country, no longer exists. Costs have taken the upward spiral here too. And paying 2.5crore p.a for an IIM grad is a big deal. Not that i'm trying to question the quality of an IIM graduate, nor do i seek justification from someone who hires an IIM grad for 2.5crore p.a. :)

What i'm trying to imply, however, is that the market tends to follow what is put before them. Graduates look at the packages these business school blokes are offered, and suddenly feel the itch. "3.2lac just ain't enough for me to code. i must be paid more.." And as a result, costs go up again.

The national media makes such a big fuss out of these recruitments, that it simply screws up the markets, in short. Suddenly employees feel the need to be compensated more for the work they're doing. And employers are forced to oblige, given the fact that the quality of skilled labour available has gone down several notches.

There are over a 100 engineering colleges in Karnataka. However, the best companies recruit engineers only from the top 5 odd colleges in the state. That too, just a handful. Consider this wild calculation

If every college in the state produces atleast 50 Computer Science Engineers every year, it would translate to 5000 graduates every year.

However, product companies such as SunGard, Google, Huawei pick up less than 10 graduates each when visiting a campus for recruitments. And remember, these companies visit only the top 5 colleges. What happens to the remaining grads? Is there a reason why most of them don't have jobs? The shocking answer, which industry experts now dole out to everyone who asks, with a certain amount of self satisfaction, is that these engineers are not QUALITY engineers. One would wonder what a "quality" engineer is. As it turns out, the system for engineering education is founded on scoring marks, and not on innovation or any other school of thought you may have associated engineering with. And as a result, you're left with a breed of robots, who derive when shown how, and calculate when given formulae and relevant data. This, is a result of the earlier dream cloud (the one which vanished). Everyone wants to get an engineering degree, and work for an IT firm, in their own town, with a dream pay packet. Thats it. Thats the dream. And as hordes of people push forward to realize this dream, what gets lost is the passion to learn, to discover, and to invent. And this has been going on for so long, that the system just adapted to the needs of the masses, and stopped catering for the ones who joined an engineering programme, for the engineering part of it.

Wheres this headed? Recently, TATA Consultancy Services said in a press release, that it was cheaper for them to hire an American to work in the US for an American client, than send an Indian to the US to do the same work. What does this imply? What happened in the 90's in India, has just taken a U-turn. Jobs which earlier poured into India, now seem to be trickling back into the International markets. It may not be noticeable at this stage, but it will be evident in the future. It doesn't go to say that it would be the death of Offshoring. Offshoring would be alive well past you and i, however, the magnitude at which it took place in the past, will be hard to replicate in the future. Atleast for us.

Universities are waking up to this rude fact. Changes are being made in the system. Syllabi are being made advanced in order for the next line of engineers to be armed with cutting edge knowledge.

The good news is that it won't leave anyone discontent. Jobs will require more commitment, and getting them will require even more of it. The distinction between innovators and workers will become evident. The hierarchy of the creators, implementors and users will show itself in the near future.

The trend will shift from localization of corporate resources, to spreading out over multiple locations in order to absorb the best from every environment. This hopefully, will be successful in creating a healthier global work environment, with better productivity and efficiency. In all probability, we should all get to see it within our lifetimes.

Unless some newspaper carries another "Highest Salary" story again. :)

cheers
wu

2 comments:

Jayant said...

Nice entry, I agree with the fact that the rising costs and reduced quality of manpower are making India, if not just Bangalore seem like an unattractive bet. But, I’m sceptical about the improvements universities are brining in to meet these new crises.

Wu said...

I base my argument on Universities improving on the fact that VTU, an Engineering varsity in Karnataka recently revamped their syllabus completely, to include concepts in use today, rather than those that were in use a decade ago. Though one could argue that the fundamentals of each field remain the same through time, i disagree. Concepts change, and in the process, fundamentals too.

Apart from the above, i've seen universities in the state bring about programmes to enhance the conversion rate from students to corporates. Various programmes like Soft skills training are now a a part of the engineering programme. Graduate engineers are sent off to a finishing school for 3 months before they start working. Couple this with a new age engineering degree, and you've got all the creases ironed out.