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Indian tech execs ponder problems ahead
Inside India: Is the industry in danger of overheating?

By Steve Ranger

Published: Monday 26 March 2007

Few industries have enjoyed the massive growth that the Indian tech industry has come to expect. And now the industry is keen to make sure that the dark clouds some can see on the horizon don't spoil the party for everyone.

Most execs at the recent Nasscom Indian Leadership Forum - the annual get-together of the Indian high-tech industry - were busy talking up the industry and its impact around the world.

Special Report: Inside India

In February silicon.com's Steve Ranger visited the Indian tech hotspots of Bangalore, Mumbai, Pune and Hyderabad. Click on the links below to see photo galleries of the cities and companies visited.

♦ Photos: Satyam's IT campus
♦ Photos: Hyderabad's tech parks
♦ Photos: Bringing tech to rural India
♦ Photos: High-tech on the streets of Pune
♦ Photos: Pune - the new Bangalore?
♦ Photo: Boom town Bangalore

Nandan Nilekani, CEO of Infosys, spoke for many when he said: "What we are seeing is the early days of a huge mega-trend."

But as well as the confidence there is a determination that the industry - and the country - deal with the some of the broader issues that could threaten future growth.

S Ramadorai, CEO of TCS, told the conference: "The question is not whether India is heating up too fast, it's whether we have enough fuel to keep it going. In any growth economy the challenges are always there."

One type of 'fuel' that is becoming harder to find is top staff.

While the education system churns out 300,000 engineering graduates every year, many are not at the level needed to support the growth of the industry, which has led to calls for reform of the system.

Increasingly companies are looking at graduates from smaller colleges in smaller towns and trying to figure out whether they actually need graduates for every job. Some are looking at setting up operations in rural areas in order to cut costs and bring them some of the benefits of the tech economy.

Attrition and salary increases are also taking their toll on margins, and the increased interest of multinationals such as Accenture and IBM, as well as the captive offshoring operations that have been set up, are further reducing the available workforce. (Click here to read more about how Indian companies are holding onto their most skilled staff.)

This means the Indian model will have to adapt, as Wipro chairman Azim Premji pointed out: "We have to move away from the concept that we are a low-cost destination to a destination that gives huge value at a cost effective price. There's a fundamental difference between the two."

Other areas - such as power, telecoms and road and airport infrastructures - all need significant improvement as well, as the growth in outsourcing piles on the pressure. Many cities experience regular blackouts, which means that IT operations have to invest in their own back-ups. Even the cost of hotels in some cities such as Bangalore is causing concern for some.

Many of these issues have been long-standing and are gradually being addressed by the government and wider public sector. Many in the industry think that any future skills shortage can be headed off by reforms to the education system and that over the next few years the road and power issues will also - slowly - be dealt with.

But there is a bigger issue to be addressed - how to make sure that the benefits of the wealth generated by IT are shared through the wider society. As Wipro's Premji warned: "If we don't do that we are asking for trouble and a choke on our own wealth creation."

Have you visited India to check out the outsourcing options? Or have you been affected by offshoring here in the UK? We want to hear your stories and opinions about offshoring. Leave your comments below or email editorial@silicon.com.