Interesting read... Flash Dance
Came in ET today. (http://economictimes.indiatimes.com/articleshow/2657001.cms)
Flash Dance
With over five lakh engineers qualifying from the 1500-plus engineering colleges in the country, there seems to be no dearth of qualified engineers. If there is still some resource gap, you can look at the approximately 2.6 million graduates produced annually in this country.
The few Indian IT companies that have come out detailing the impact of the subprime crisis have put the fall in the revenue numbers at a few million dollars. Inflation? It seems to be down to the lower single digits (unless you want to buy vegetables in Mumbai ). And on the flights to Bengaluru, you need to search for the elusive middle class Indian who doesn’t have a laptop.
The threat from China doesn’t exist — its evident that the Chinese will never learn English. No IT major in India has an attrition that is more than 15%. There is no question of a profit warning because of the appreciating rupee — it will be counter-acted by raising the utilisation by few percentage points. So it seems a great growth picture. NASSCOM itself indicates that the IT offshoring support from India will grow at 17% annually, touching 60 billion dollars by 2010. The party just seems to have begun.
Well, one of my childhood friends once told me that the eyes cannot see what the mind does not know. One needs to look beyond : at the ‘real’ number of people on the bench, the last-minute postponements in the joining dates of campus offers, the endless interviews before one gets accepted onto a project, the larger number of hours one is expected to work, the lower variable pay doled out to a wet-behind-the-ears programmer, the opening of a sales office in a remote country, and the Da Vinci-esque creativity shown in inventing reasons for letting go excessive capacity created in anticipation of business. And then these speak of a different reality.
You can continue to have a 15% impact on payroll to retain the best of talent and attack the problem of profitability by increasing the intake of fresh graduates. But, by definition, these young minds need to go through at least three months of training. Remember, the bulk of the talent that comes into industry is from engineering colleges that have faculty that passed out from the same college the previous year and wasn’t employed in IT. Putting them onto a job by cutting corners on training can lead to severe quality issues and hence loss of customers. You can still avoid margin pressures by placing them onto so-called ‘non-critical’ engagements that do not need years of experience. But all you would have done is solved the margin problem for the next quarter.
That, in essence, is my fear. In the quest to meet high margin expectations and market images, the IT industry may continue to spend too much on direct costs and avoid any serious investments in R&D that could yield breakthroughs in productivity. This in turn could lead to a spiral of a high-volume-low-end-mediocre-work . For those who think it is far-fetched , just turn the clock back by two decades. The brightest graduates (including engineers) joined the most glamorised job of 1970s — a Probationary Officer in a nationalised bank. With the wave of nationalisation euphoria wearing-off , and successive administrations reducing the job to the most mundane set of activities, a job in a nationalised bank has significantly eroded its appeal to an ambitious individual today.
So what is the conclusion? First, get some reality into the lives of ‘any college any engineer with three years experience’ . Prepare him for a single digit increment. Second, take money out and invest in a real product; or a true productivity framework, preferably both. Third, stop floating the maintenance programmer of retail banking system as a banking domain expert and start investing a little more money in building and gaining real domain experience.
Most important, for a country that has excelled on its labour cost arbitrage and has not seen a real bad market in its life cycle, this almost habitual, unguarded optimism is dangerous. Do not get me wrong — I find the outlook reasonably bright in the long run but, we need to remember it is certainly not a given. The winners are likely to be the prudent investors in the mutual funds, not the flyby-night day traders. Greed is one thing, but the industry and its investors need to realise that a 15 to 20% operating margin in a service industry is not bad either.
The author is CEO, Capgemini
Labels: life
posted by IT Opportunities at 10:36 PM(IST)
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