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Sustaining the Growth of Indian IT and Software Industry Challenges and Opportunities
Prof. Narendra M Agrawal
Monday, February 1, 2010
The Indian IT and software industry has had a phenomenal growth for the last two decades with year-on-year growth exceeding 30 percent. In spite of the worldwide recessionary trends of the last two years, the total revenue of Indian IT-BPO industry for FY2009 is estimated at $71.7 billion, accounting for 5.8 percent of India’s GDP. The software and BPO export revenue is estimated at $47 billion, with an annual growth of about 16 percent for FY2009. The industry currently provides direct employment to about 2.2 million professionals and indirect employment to about eight million people.

The growth of this industry till date has been mainly due to availability of highly competent, cost competitive, and English speaking software professionals in the country. Superior growth opportunities in software industry and shortage of human capital led to many universities and academic institutions increasing their in take in software courses. A large number of corporate and private software training centers has come into existence to meet the increasing demand for software professionals. India produces more than 200,000 engineering graduates every year and the output of the engineers has tripled in the last ten years. However, informal interactions with software organizations suggest that the quality of software professionals from many universities as well as from many of the corporate and private software training centers was not up to the mark and did not fully meet the industry requirements. It is in this context that this paper examines deficiencies experienced in human capital and the initiatives being taken by various organizations and agencies to bridge the gap between requirement and supply of human capital for Indian software industry. The paper makes recommendations for the software industry, academic institutions, and software training centers for improving the supply, composition, and quality of human capital for sustaining the growth of Indian software industry.

Unique Human Challenges in Indian Software Industry
Some of the unique human challenges being experienced by the Indian software industry are as listed below:
* Due to shortage of qualified software professionals, the software organizations in India have been recruiting engineering graduates irrespective of their disciplines based on their analytical and learning capabilities. These fresh engineering graduates need to be given substantial inputs in software engineering and current practices in the software industry. While the industry leaders such as TCS, Infosys, and Wipro are able to provide finishing school training of 3-6 months duration, small and medium size software organizations find it difficult to provide finishing school training to their recruits. They have to either recruit people with necessary expertise or rely on the external training agencies.
* In the university colleges and even in recently started Indian Institutes of Information Technology (IIITs), there is substantial shortage of teaching faculty. Teachers in many university colleges do not have enough exposure to the problems and requirements of the industry. Due to substantial differences in pay and perks being offered by academic institutions vis-à-vis software companies, academic institutions find it difficult to attract and retain bright teachers. Few leading software organizations have taken initiatives to build up linkages with the academic institutions to share current business practices and cases, and train teachers. However, much more needs to be done to enhance the competencies of teachers in university engineering colleges.
* Indian software organizations work simultaneously on multiple projects with multiple clients. And hence, they require a number of software professionals who can perform leadership responsibilities early in their career. While software professionals like to get the leadership titles, many of them lack the competencies and aptitude for leadership roles. As a result, facilitating young software professionals to grow as leaders has become a huge challenge for the Indian software industry.
* Since Indian software industry essentially works as a service provider in multiple domains, it needs professionals at middle management level, who have software technology expertise, domain knowledge, managerial competencies, and project management capabilities. The task of growing middle managers with multiple competencies becomes more complex due to the high growth rate of IT-BPO industry in India and also due to the high rate of attrition.
* The industry has reached a level where it needs to move up on the value chain for maintaining its growth. This in turn requires that software professionals should have not only superior software engineering and design skills but should have competencies for providing total solutions in service domain as well and develop competencies for product and technology development.
* While the industry has been essentially export oriented, it needs to build a global mindset in terms of building capabilities to attract and retain international talents. Further, the leadership needs to nurture a culture where the Indian software organizations can move towards being truly transnational and willing to share knowledge and learn from human resources from multiple cultures working in globally distributed teams.

Recommendations for Enhancing the Knowledge and Nurturing the Talent
Sustaining the growth of Indian software industry will require a much higher level of collaborative effort between national institutes such as IITs and IIMs, university colleges, large and medium size software companies, government agencies, and private training institutes. Implementation of the following recommendations will ensure the availability of the right talent for managing the growth of Indian software industry:

Large and medium size software organizations should adopt colleges teaching IT and software engineering related courses and encourage their executives to share current tools and industry practices. If large and medium sized software companies could invest the equivalent of half-a-percent of their manpower for interacting with academic institutions on a part time or fulltime basis for the next five years, it would substantially improve the quality of education in university colleges. It will possibly eliminate the need for finishing school training currently being provided by the large software organizations. The enhanced supply of a pool of talented engineers who are industry ready will further increase the attractiveness of India as an outsourcing center for software services in the world market.

National institutes of technology and management, namely, the IITs and IIMs, should jointly work on research projects that will help the Indian software industry to grow up on the value chain, in terms of being able to provide total solutions and developing new products and technology.

The software industry should offer a large number of attractive scholarships for postgraduate and doctoral level courses in IT and software at national institutes of technology and management. This will enhance research in software related fields and subsequently increase the supply of quality teachers.

These institutes should provide leadership to university affiliated colleges by working along with them to develop course material and by providing training to their teachers. National institutes should use distance education technology to deliver postgraduate and specialized courses for university teachers and software professionals.

The government and the governing bodies of the national institutes and the university colleges should nurture entrepreneurship amongst the faculty and evolve policies that would help attract and retain competent faculty.

National management institutes such as the IIMs should work along with the Indian IT organizations to help them develop a global mindset and competencies to grow as transnational organizations.

The corporate and private software and IT training centers should proactively develop professional norms, which will ensure that unscrupulous operators do not enter the field. The corporate and private software and IT training centers should avoid the temptation to become everything to everybody. They should identify their own segments for specialized training. Further, before admitting students for a course, they must ensure their eligibility for the same through stringent measures.

The author is Prof. Narendra M Agrawal of Indian Institute of Management. He can be reached at agrawal@iimb.ernet.in
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