Tuesday, October 17, 2006

previous entry | main | next entry | TrackBack (0)


What do Boston and Bangalore have in common?

The demand for trained IT workers is having some interesting effects in both India and Massachusetts.

India first -- Somini Sengupta reports in the New York Times that skills shortages could act as a bottleneck for the Indian service sector:

As its technology companies soar to the outsourcing skies, India is bumping up against an improbable challenge. In a country once regarded as a bottomless well of low-cost, ready-to-work, English-speaking engineers, a shortage looms.

India still produces plenty of engineers, nearly 400,000 a year at last count. But their competence has become the issue.

A study commissioned by a trade group, the National Association of Software and Service Companies, or Nasscom, found only one in four engineering graduates to be employable. The rest were deficient in the required technical skills, fluency in English or ability to work in a team or deliver basic oral presentations.

The skills gap reflects the narrow availability of high-quality college education in India and the galloping pace of the country’s service-driven economy, which is growing faster than nearly all but China’s. The software and service companies provide technology services to foreign companies, many of them based in the United States. Software exports alone expanded by 33 percent in the last year.

The university systems of few countries would be able to keep up with such demand, and India is certainly having trouble. The best and most selective universities generate too few graduates, and new private colleges are producing graduates of uneven quality.

Many fear that the labor pinch may signal bottlenecks in other parts of the economy. It is already being felt in the information technology sector....

Demand is beginning to be felt on the bottom line. Entry-level salaries in the software industry have risen by an average of 10 to 15 percent in recent years. And Nasscom, which helps companies wanting to outsource find workers, forecasts a shortage of 500,000 professional employees in the technology sector by 2010....

Higher education is still available only to a tiny slice of India’s young. No more than 10 percent of Indians ages 18 to 25 are enrolled in college, according to official figures. Nearly 40 percent of Indians over the age of 15 are illiterate.

The industry is lobbying hard to allow private investment in Indian higher education. Right now the government allows only nonprofit ventures, and often they are of varying quality or are the brainchildren of politically connected entrepreneurs.

The Commerce Ministry has recently floated the idea of private foreign investment in higher education. Indians account for among the largest groups of foreign students in the United States, and India increasingly sends students to other countries, like Australia and Canada.

[Oh, sure, all this outsourcing to India means demand for jobs there, but not in the U.S.A.!!--ed.] Au contraire, my italicized friend -- the Boston Globe's Robert Gavin reports on what's happening to the tech sector in Massachusetts:
Massachusetts' economic recovery has gathered momentum in recent months, and there's a good reason: The technology sector is back....

Employment in professional and business services, comprising a variety of tech firms, has grown a healthy 2 percent in the last year, twice the rate of overall employment growth in Massachusetts, according to the state Department of Workforce Development. Makers of technology products are bucking the trend of job losses in manufacturing and adding jobs -- more than 3,000 in the last year. Massachusetts tech exports are surging; foreign sales of semiconductor manufacturing and testing equipment nearly doubled in the past year.

Technology has long driven the state's economy. The two technology-dominated employment sectors, professional and business services and manufacturing, account for about one-fourth of state employment, but they capture only a small part of the industry's impact because it increasingly reaches into areas from pharmaceuticals to financial services. High-tech machinery, instruments, components, and similar products account for nearly 60 percent of the state's exports.

Demand for technology workers, meanwhile, is growing. The state's most recent survey of job vacancies, at the end of 2005, showed openings for information technology occupations jumping 13 percent from a year earlier. Monster Worldwide Inc. , which operates the job-matching web site Monster.com, reported last month that on line job postings for IT workers grew 10 percent in Greater Boston over the year.

The Federal Reserve found in a recent survey of businesses that the supply of technical workers in the Boston region is shrinking to the point of companies boosting wages as much as 15 percent.

"It's not 2000, but it's also not 2001," said Larissa Duzhansky, regional economist at Global Insight of Waltham, referring to the tech boom and bust years. ``The sector has grown at a healthy pace and it's continuing to recover well."

Certainly, the state's technology sector faces a long road to recovery. Professional and business services so far have regained only about half the nearly 70,000 jobs the sector lost in the last recession. Tech manufacturing, which also shed about 70,000 jobs, has recovered only about 5 percent.

But analysts and industry officials add that today's technology industry is different from that of the dot-com craze, when it seemed any company with an Internet domain could attract millions of dollars from investors, regardless of whether they had profits or even products. Today's sector is more diverse and better grounded financially, reaching across an array of markets and technologies....

Global demand for technology products, from cell phones to MP3 players, also is boosting Massachusetts tech firms, which make the equipment for manufacturing such products. Booming electronics companies in China, for example, need the advanced manufacturing and testing equipment designed and made in Massachusetts. Those equipment sales have helped make China the state's sixth largest foreign market, as well as one of its fastest growing.

Sales to China and other Asian nations account for at least 70 percent of sales for Axcelis Technologies Inc., of Beverly, a maker of semiconductor manufacturing equipment, according to Mark Namaroff, senior vice president of strategic marketing. The company, which employs about 1,000 in Massachusetts, has reported double-digit revenue growth this year, while adding about 50 manufacturing jobs.

"Asia, particularly China, is hot," said Namaroff. ``Their growth has meant opportunities for us."

The tech rebound also means more opportunities for tech workers....

Greg Netland, chief executive of Sapphire's parent, Vedior North America of Wakefield, expects the market for tech workers to only get tighter. "The war for talent is back," he said.

This war for talent appears to be a global phenomenon -- be sure to check out the Economist's recent survey for more. Bloggers are mentioned.

posted by Dan on 10.17.06 at 12:33 PM




Comments:

An italicized friend? That must be something like a french fry.

posted by: anon on 10.17.06 at 12:33 PM [permalink]



Why would an Indian engineer be "unemployable" if he didn't have good English skills? What sort of team organization would require every single software designer, or every single mechanical engineer, or whatever, to communicate with Americans or other English-only speakers?

And if inability to deliver a decent oral presentation were a complete inhibitor to working as an engineer, there'd be a lot of American engineers out of jobs.

posted by: david foster on 10.17.06 at 12:33 PM [permalink]



Somini Sengupta has been writing some very interesting articles in the Times recently. In fact, if you recall, she just penned three prior articles on a fundamental infrastructure problem in India that may well be another critical factor in impairing India's economy-- the water crisis there: http://www.energybulletin.net/21043.html

I've been to parts of South and Central India before (have picked up some Hindi and Tamil along the way), and I find interesting, the way that such first-class talent is mixed with almost incomprehensible infrastructure and public health problems in a number of the areas. There's quite a bit of talent no doubt not just in Bangalore but in areas like Hyderabad, Chennai and Mumbai, and many of the smartest people I've met have come from those places.

What I found most amazing was the intellectual flexibility of so many of the workers, both on the techie computer side (ability to move from platform to platform with ease) and with their skills in general. Especially in things like graphic design, database networks and platform adaptation, they're first-class. Also in general, the software engineers were fluent not only in native Indian languages like Hindi and Tamil but, quite often, in four or five other European/Asian languages. It was hardly unusual to find software engineers in South India who could easily speak English, French, German, occasionally even some Chinese and Japanese on top of their native Indian tongues. In fact, it's not only the USA that's grappling with the outsourcing issue-- a number of French, German and Japanese companies have also been setting up shop in South Indian towns! (France was a colonial power in a chunk of South India, in fact.) They're very capable people always learning and applying what they've learned.

OTOH, Sengupta is right in her articles on the water crisis there-- even many of the wealthier cities had areas of just unbelievable stench from untreated or poorly-treated water, a couple people in our initial entourage actually vomited if the wind kicked up the wrong way. Potable water was scarce and water shortages and stagnation everywhere you looked. A number of the "middle-classy" regions didn't have much in the way of running water, or the water was unreliable and riddled with diseases-- people would just store up water in not-so-reliable cisterns, for example. Many areas, there weren't really any working toilets-- people would basically just defecate in certain streets or around railroads. Communicable diseases really were a major problem and deterred some companies from setting up shop there-- just recently they've had a dengue fever epidemic there, and malaria and now HIV are growing at a nasty rate.

The facts on the ground as I can best see them, is that India's population growth is rapidly outstripping the country's capacity to provide that population with a working infrastructure. They don't have anywhere near the resources at present to provide for the masses in terms of water needs, roads, resources or literacy. I *do* think that most of the local bureaucrats do try (to some degree) to provide, but they're at best treading water. Honestly, I just feel like India has to curb population growth a bit and allow the system to catch up with the existing population, otherwise their fledgling tech industry will be swallowed up by the basic needs of providing a working society at all. Walking before one runs, I guess.

But I do think that the country has great potential. I just sense they have to take care of the basics a little better first, bring the population growth under control, improve the public health and utilities infrastructure, then their tech and other industries should take off.

posted by: Greg on 10.17.06 at 12:33 PM [permalink]



Hi David,

I agree, FWIW I think the language issue is overrated in general as far as *required* skills for the engineers on the ground. Although it was impressive how many of the engineers were fluent or conversant in up to 5 or 6 languages, they generally conversed with each other in Indian languages. Again, I found in India that the engineers did work that could service people in e.g. France, Germany, China and Japan as well as in the US or UK, and most of the engineers just did their work and communicated in an Indian language (e.g. Hindi or Tamil). There's a popular Hindi-language Webportal called Webdunia.com that many would use to access even technical specs in Hindi (though now Yahoo, Microsoft and Google have all been moving in on Webdunia.com's turf with Hindi portals of their own). It's amazing how rapidly software options have expanded in native Indian tongues, which don't use the Roman alphabet.

Then, at the other end of the pipeline, there'd be somebody fluent in e.g., English, French, German, Chinese or Japanese who could bring the finished product to the customers in the outside country. Thus although language ability was impressive among the engineers, I don't really think it was critical for the engineers themselves as far as the work they did. You just needed somebody later on who could speak the outside language and was specialized in it somehow (e.g. had worked for a while in Paris or Tokyo).

Most important IMHO is to have engineers who can do good work in any language e.g. a native Indian tongue, and the infrastructure in general to help ensure efficient conveyance of IT technologies both within and outside the country. If anything, the infrastructure issue may be the main present bottleneck.

posted by: Greg on 10.17.06 at 12:33 PM [permalink]



Only half or fewer of the jobs lost have been regained hardly spells a shortage here. Overall growth has been at or below gdp nationally. There has been an increasing concentration towards the tech centers though. Outside these centers you might as well move to India.

posted by: Lord on 10.17.06 at 12:33 PM [permalink]



On the language question-- I work (in the US) for a very large American technology company of which I'm sure you've heard although I won't name it. I'm a software engineer myself. Our particular product has its R&D done here in the US, but support (fixing of bugs reported by customers) for this product is done in India. The way we work is such that each developer is generally responsible for some component of the overall product. Anyone with a question about that component is expected to go straight to the "owner" themselves, or read the relevant design documents (which are all in English). And so we expect the India team to do the same-- if they have a question for the developer of some component, the Indian developer should be able to go directly to his American counterpart and ask. We also have a lot of internally developed tools, websites, documents and so on, all of which are in English. And the fact of the matter is, none of the American developers speak Hindi, so all of the Indian developers need to speak English pretty proficiently for this to work. And, in fact, they do.

On the subject of the Boston Globe article, it was followed up the very next day with the announcement that EMC (cited in the article as the biggest tech employer in MA and a big success story) had badly missed earnings and was laying off 1200 or so people. There may be less to this "recovery" than meets the eye, unfortunately.

Meanwhile, at the company where I work, our development organization continues to exist, but it also continues to shrink. They've hired maybe 3 people since 2001, while about 7 or 8 have discreetly been shown the door. No headlines in the WSJ about massive layoffs, just onesie twosie elimination of the lowest performers without backfilling their positions.

I personally remain employed and, frankly, pretty well compensated, but I can't help being pessimistic about the long term prospects of this field in the US.

posted by: Marc on 10.17.06 at 12:33 PM [permalink]



The myth is there is any shortage of 'talent'. Talent floods the marketplace. Talent is cheap. Talent is everywhere. What the Economist article actually calls talent, and what is in short supply, is power, and that always will be. The power to hire, power to spend, power to control, power to dominate.

posted by: Lord on 10.17.06 at 12:33 PM [permalink]






Post a Comment:

Name:


Email Address:


URL:




Comments:


Remember your info?





Politics, economics, globalization, academia, pop culture... all from a untenured tenured perspective

Main home page
Main blog page
About Me
Search My Blog
Favorite Blogs
Book Recommendations
Books of the Month (Summer 2008)






Reviews of DanielDrezner.com:

"Sharp but informal commentary on politics and foreign policy." -- The New Republic

"Dan Drezner is terrific.... Excellent blog." -- Andrew Sullivan

"Dan's stuff is always worth reading." -- Eugene Volokh

"One of the essential weblogs." -- Gawker.com

"Old battle horse of the blogosphere." -- Jewcy.com

"Soft porn." -- Amitai Etzioni

"Spawned grave atrocities and vast destruction." -- Glenn Greenwald

"Monday morning quarterback... conservative robot... the very foundation of troubles in this country." -- not-so-random readers


Contact me at:
ddrezner@gmail.com
(But click here to read my e-mail policy)









Search the Site


Try advanced site search









Favorite Blogs

TNR's Open University
Jacob Levy
Glenn Reynolds
Andrew Sullivan
Mickey Kaus
Virginia Postrel
The Volokh Conspiracy
Josh Marshall
Crooked Timber
OxBlog
Real Clear Politics
Kevin Drum
Across the Aisle
Economist's Free Exchange
TNR's The Plank
NRO's The Corner
TAP's Tapped
America Abroad
Duck of Minerva
Opinio Juris
Brad DeLong

Jeff Jarvis
Mystery Pollster
Mark Kleiman
Meryl Yourish
Megan McArdle
Marginal Revolution
Michael Munger
Chris Lawrence
Matthew Yglesias
Hit and Run
Cold Spring Shops
Stephen Green
Outside the Beltway
Pejman Yousefzadeh
Laura McKenna (11D)
Elected Swineherd
Phil Carter
Joe Gandelman
Winds of Change
Andrew Samwick
Greg Mankiw
Dani Rodrik
Roger L. Simon
Tom Maguire
Greg Djerejian
The American Scene
Post Global
Democracy Arsenal




Recent articles online

"Foreign Policy Goes Glam."
The National Interest, November/December 2007

"Rise of the Hipster Statesmen."
Newsweek International, November 1, 2007

"The New New World Order."
Foreign Affairs, March/April 2007

"Mind the Gap."
The National Interest, January/February 2007

"The Grandest Strategy Of Them All."
Washington Post, December 17, 2006

U.S. Trade Strategy: Free Versus Fair
Council on Foreign Relations Press, September 2006.

Complete online article archive




Blog Archives

June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004
September 2004
August 2004
July 2004
June 2004
May 2004
April 2004
March 2004
February 2004
January 2004
December 2003
November 2003
October 2003
September 2003
August 2003
July 2003
June 2003
May 2003
April 2003
March 2003
February 2003
January 2003
December 2002
November 2002
October 2002
September 2002

Academia
Area studies
Book club
culture
economics
fence-sitting
from Blogger
globalization
homeland security
international relations
law
Mediasphere
My very important posts
New Republic
outsourcing
personal
politics
Sports
The blog paper
the blogosphere
thesis ideas
Trade and Development
U.S. foreign policy
website maintenance

See full archives listing




Recent Entries

Someone keep Fleet Street away from Bill Clinton
It rivals Buckley vs. Vidal, I tell you
So.... are the Clintons morons?
The New York Times didn't ask me, but then again, that's why I have this blog
Monica Crowley's jet black pot
Al Qaeda is losing
Speaking of karma....
The blog post that writes itself
What made me laugh today
Where should Hillary go?




Site Credits