Indian outsourcing: Why skills shortages persist despite the graduate glut

The boom in India's services has spawned the growth of new engineering colleges. Yet the outsourcing industry thinks too few of their graduates are up to scratch.

India's colleges produce some 800,000 graduates annually but the country's outsourcers say not enough are immediately employable. Photo: Saritha Rai

A double-digit percentage of India's budding IT engineers could not answer this question correctly:

Identify the smallest decimal number from the following:

0.5, 1/0.5, 0.555555, (0.5)²

Nearly a third of the crop of graduating engineers chose 'had' over 'have' in the following question:

Did you —— cereal for breakfast? (had, have, ate, having)

India's outsourcing boom has triggered an explosion of engineering colleges in the past decade. But only a fraction of the engineers they produce are immediately employable.

The industry's problem is no longer the quantity but the quality, and it's an issue that's jeopardising the growth and profitability of the sector.

For example, in Bangalore's neighbouring Tamil Nadu state, many engineering colleges have mushroomed in the new millennium. Companies selling coffee, sugar, beverages and jewellery - and even a producer of dhoti, the local Indian male garment - are among those organisations that run colleges, as do hordes of politicians. In an education-hungry country, running an engineering college has become something of a status symbol.

And thanks to this proliferation, the entry threshold in engineering colleges is falling and the number of graduating engineers is rising every year. According to estimates, India's current group of 4,000-odd engineering colleges produces some 800,000 engineers annually, a jump from 500,000 in 2007.

Most of these engineers are drawn to the outsourcing industry, India's largest recruiter of engineers.

Meeting outsourcing's manpower requirements

Despite the apparent glut, the industry is struggling to meet its manpower requirements. Companies need numbers, but they also need quality.

"The crux of the problem is that critical thinking, problem solving and the application of concepts are skills in short supply in fresh engineers," says Srikantan Tan Moorthy, head of education and research at leading outsourcer Infosys. They are also weak in technical skills, soft skills and English proficiency, he says.

Currently, outsourcing companies rate only a fraction of these masses of engineers as employable. The top schools produce brighter, better equipped and more global graduates year after year, recruiters say.

But only half the employable engineers graduate from these top schools. The rest are spread far and thin in what Aggarwal calls the long tail - an untapped pool of talent.

The effort that goes into culling a handful of prospective hires each from batches of hundreds of graduating engineers of less-known engineering colleges in small cities such as Sivakasi, Indore, Kakinada and Ghaziabad is immense.

Himanshu Aggarwal's Aspiring Minds has made a business out of assessing the employability of India's engineers. This year, the Delhi-based company tested 200,000 Indian engineering students graduating in 2012. The prognosis: a sizeable chunk of them are unemployable.

"For most Indians who enrol in so-called professional colleges, there is no profession at the end of it," says Aggarwal, co-founder and CEO of the firm, which provides pre-recruitment tools to the industry.

Range of graduate talent

The variations in graduate talent have widened enormously, says Ashok Soota, an outsourcing industry veteran of over two decades who set up the outsourcing arm of Wipro. "The quality at the top of the pyramid is superb but falls at the base," he says.

In the beginning at Wipro, he only hired engineers from the top state-owned schools, called Indian Institute of Technology and Regional Engineering College. Since then, in his two outsourcing start-ups, MindTree and Happiest Minds, Soota's own net has widened to cover the country's top 100 engineering schools.

As customers get more demanding, there is pressure on companies to hire ready-made talent. "As the base of the pyramid broadens, a few finishing school-type places are stepping in to train fresh engineering grads," says Soota, who has recently hired from one such institution for his nine-month old start-up, Happiest Minds.

The start-up is already closing in on its 400th employee, epitomising the hiring trend in the industry in India despite the global economic slowdown.

When outsourcing companies fall short on employable candidates, creative solutions are called for, says Aggarwal of Aspiring Minds. The tests that assess the hirability of engineers can also be tweaked to predict their trainability. This way, companies do not expend valuable inhouse resources on random training.

For those who are not readily employable, the largest IT employers spend millions of dollars running extensive classroom-type training schemes in subjects such as English grammar and programming basics. These sessions typically last several months and make engineers job-ready.

Moorthy of Infosys says his company spends $6,000 on every fresh engineer's six-month mandatory training at the company's residential school.

As the gap between what the industry requires and the available talent pool widens, the industry's competitive edge inevitably suffers.


Saritha Rai is an India-based journalist and commentator who covers technology, business and society from her ringside seat in Bangalore.

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