New Workforce - The Weblog of New Equities

India's IT skills gap

Think offshoring jobs to India will address the coming IT labor shortage? Think again:

Business leaders have warned that India's information technology (IT) industry is heading towards a severe shortage of highly-skilled manpower.

They say India will not be able to achieve its targeted growth rates if the issue is not tackled immediately.

Young engineers and college graduates lack necessary skills, a conference in the city of Hyderabad was told.

Software industry body Nasscom has warned that India faces a shortfall of half a million skilled workers by 2010.

More evidence pointing to the development of a strong and persistent job market for career IT professionals.

Outsourcing gets outsourced

In the comments section of an earlier post, New Equities consultant Rajah Chacko calls our attention to an amusing series of Dilbert comics that ran last week:

Asok, the intern, has his job outsourced to India. The irony of Asok coming from India is not lost. Today's (6/1/06) comic comes full circle.

The comic punchline Rajah references above can be found here.

And once again, life imitates Dilbert, but with an ironic twist. This week, Information Week's Patricia Keefe points out that outsourcing has indeed come full circle, as even India goes offshore to meet the market demand for talent. The outsourcers are now themselves outsourcing. (What do we call this phenomenon -- "off-offshoring"?)

Dubbed "reverse outsourcing," the effort involves both opening offices in other countries and hiring foreigners to work in India (see Marianne McGee's recent blog asking whether IT pros would consider moving to India to move up the career ladder, for a range of perspective from InformationWeek readers on that idea).

Now much of this hiring supposedly won't be done in the U.S. That's not surprising - Indian firms are under the same cost pressures as are U.S. and other western companies, and they are looking at rising salaries for local workers given the fierce competition for their services. But they will hire some Americans, and that trend is expected to grow. It will be interesting to see whether that sparks a mini price war or helps to ratchet up salaries a bit - at least in some jobs - on both sides of the ocean.

In the same post, Keefe links to an item on a recent study by American Sentinel University that suggests the impact of offshoring on the US job market may be overhyped, especially as regards jobs requiring a combination of technical skills and business knowledge. This is in line with an earlier study done by the McKinsey Global Institute on the impact of offshoring service sector jobs.

In fact, according to another linked article, half of the IT workforce is confident enough to be looking to the next job:

"Tech employment is on a steady uptick," says Kevin Knaul, VP at staffing firm Hudson, another firm that also today released its own new survey data showing that job confidence among IT workers was up significantly in May compared with last May.

Demand for talent in "niche pockets," like business analysis and project management, has been up for a while, he says. But in the second quarter, "there's been enough pockets seeing an increase that there's an overall improvement" in the general IT employment market, says Knaul. This makes IT pros feeling confident about looking for different and better opportunities, he says.

Being in the business of putting IT consultants to work, we agree with the above analysis. Far from a loss of IT jobs, we see a coming boom in the IT job market, which will present both opportunities and challenges for employers and staffing firms alike. The traditional reactive approach to finding and hiring  talent is inherently inefficient, and neither consultants nor the companies who benefit from their expertise are well served by it. The process, roles and  people involved are changing, and the realization is setting in that staying ahead of the curve will require new models for workforce management that provide greater flexibility and better serve the goals of the people who do the work.

New Equities gets it, and we're on it. In fact, it's what we do.

The $100 laptop

MIT legend Nicholas Negroponte is at it again:

Nicholas Negroponte, chairman and founder of the Massachusetts Institute of Technology Media Labs, has been outlining designs for a sub-$100 PC.

The laptop will be tough and foldable in different ways, with a hand crank for when there is no power supply.

Professor Negroponte came up with the idea for a cheap computer for all after visiting a Cambodian village.

His non-profit One Laptop Per Child group plans to have up to 15 million machines in production within a year.

Negroponte's design would make computing accessible to children all over the world, as well as in the US:

Children in Brazil, China, Egypt, Thailand, and South Africa will be among the first to get the under-$100 (£57) computer, said Professor Negroponte at the Emerging Technologies conference at MIT.

The following year, Massachusetts governor Mitt Romney plans to start buying them for all 500,000 middle and high school pupils in the state.

Professor Negroponte predicts there could be 100 million to 150 million shipped every year by 2007.

McKinsey: impact of service sector offshoring more limited than we think

According to an article in the International Herald Tribune, the McKinsey Global Institute recently released a report on the offshoring of service jobs, which many in the IT industry will find reassuring.

Barring technological breakthroughs, only 11 percent, or 160 million of the 1.46 billion service jobs worldwide could be performed remotely, according to the report. An even smaller fraction actually will be. McKinsey estimated that in 2003, 1.5 million service jobs were done in lower-wage countries for customers in higher-wage countries. By 2008, that number is expected to reach 4.1 million, or 1.2 percent of total services jobs in developed countries - far too small a number to have a meaningful impact on overall employment and wages.

McKinsey made its predictions by extrapolating from an analysis of eight sectors - auto, health care, insurance, information technology services, retail, retail banking, packaged software, and pharmaceuticals - that together account for 50 percent of all nonagricultural employment.

Although the report noted that jobs in the packaged software and IT services sectors were more mobile than most - they estimate that roughly half have the potential to move overseas - the high-value, non-commoditized jobs were staying onshore.

According to the report, losses in the developed world, so far, have been narrow. Even in the U.S. computer and data processing services sector, which has seen substantial offshoring, overall job and wage growth outpaced that of the economy as a whole. And while demand for so-called high-value-added jobs in the developed world has grown, commoditized functions have migrated to lower-cost labor markets.

From 2000 to 2003, for example, in the thick of the dot-com bust, jobs in software engineering grew by 3.1 percent in the United States, while the number of computer programming jobs shrank 8.8 percent and wages fell by 1 percent, Farrell said.

For companies, the real thrill of offshoring is cheap labor, but executives don't base decisions solely on labor cost - or they shouldn't, McKinsey contends. Infrastructure, regulatory environment, vendor landscape, market access, and risk are also important factors.

It's not surprising that offshoring has been overhyped, both as a panacea and as a threat.  The reality is that its impact overall is limited. In the final analysis, businesses still have to stick with basics and find ways both to work more efficiently and make smarter use of human capital.

It's a flat world after all

Actually, not quite yet but getting there, according to New York Times columnist Thomas Friedman. Harvard Business School's Working Knowledge has a review of Friedman's new book, The World is Flat: A Brief History of the 21st Century.

Friedman, an influential columnist for The New York Times and respected authority on Middle East politics and society, traveled widely to research The World is Flat. Much of what he shares about business trends will not surprise sophisticated managers, but the telling itself is often enjoyable. He conveys the same degree of respect and admiration to call center employees in Bangalore and a working housewife in Utah as he does to the numerous CEOs and big-wigs he lunches and dines with. (His interviews include Bill Gates, Colin Powell, and heads of major companies in India and China.)

His message: Wake up, America, and stop resting on your laurels. “In China today, Bill Gates is Britney Spears,” Friedman writes. “In America today, Britney Spears is Britney Spears—and that is our problem.”

Elsewhere, they publish reader responses to ideas provoked by Friedman's book, embodied in the question, "Is a level playing field a good thing?"

UPDATE: Wired has an extensive interview with Thomas Friedman by workforce guru Daniel Pink.