India Rising (and Trying to Stay Aloft)
Earlier in the month, Supply and Demand Chain Executive published a solid article examining the state of the Indian supply chain. For those unaccustomed to doing business in India, the piece highlights a number of items that those sourcing from the region can expect to experience. Indeed, from the gridlocked traffic in Bangalore to the sub-bicycle speeds with which a container moves across the heartland of the nation, India can be a supply chain shock for the uninitiated (as can the food, but that's another story).
But while the manufacturing supply chain is one area of concern in India, the IT sector is something else entirely. And no longer can skilled technical labor still be construed as inexpensive or low cost. I was talking to an executive in the Spend Management world the other week who told me that skilled developers in Bangalore now commands salaries in excess of $35K US per year. With apologies to E-Sourcing Forum's David Bush, that's coming within mortar range of Indianapolis labor rates. I remember back in the earlier days of FreeMarkets where we were able to hire decent Indian development talent for 1/3 that amount. My, how things have changed!
But skills outside of the IT arena are not necessarily keeping up with rising demands and overall salary inflation in the educated classes. Consider that according to an expert interviewed by Supply and Demand Chain Executive that "A lot of the supply chain functions, like logistics, are often carried out [in India] by people who are not very skilled or educated ... As a result, we have a very labor-intensive, manual environment in India." The good news is that this "is beginning to change ... as India's major institutions of higher learning ramp up supply chain programs to impart the skills and knowledge necessary to manage a complex supply chain. But even though the nation is beginning to build up a cadre of supply chain-oriented professionals, the talent pool of managers and executives continues to lack depth of experience and knowledge of advanced supply chain principles."
Of course expertise matters little if you’re stuck in the mud. Literally! Consider that "Nearly 80 percent of goods transported in India move over highways, yet highways make up just 2 percent of the country's more than 2 million miles of roads. Most of India's byways are, at best, poorly maintained blacktop and, at worst, un-maintained dirt tracks." And I've not even started to mention India's port challenges, which make China's export capacity issues look like child's play.
My goal here is not to harp on India's challenges, but to offer a candid take on some of the basic infrastructure and related issues facing the subcontinent. I could just have easily spoken to more positive topics in this post such as India's strong history of democracy, the willingness of its manufacturers to tolerate smaller production runs than China, the relative high skill and automation in manufacturing (again, relatively speaking), and the overall educational ethos and engineering emphasis in the region which makes the West look far inferior, by comparison. Confused? India is no doubt a conundrum. But without question it is as fascinating a region as any in the world today. It's been far too long (six years) since my last trip. You can bet that I'll be making it over in 2007 to see first hand how things have changed.
- Jason Busch
Tweet
TweetBacks
Meet me if you come down to Bangalore. Being with Spend Management for over 9 years now, I find your articles quite interesting :)
Makes me be thankful this week for globalisation and the opportunities it provides for people in an increasing number of countries around the world - from the big names like India and China to the former Soviet countries.
1. The caliber of the talent pool now available is substantially more capable and business savvy - it used to be that most top engineers in India used to want to find the easiest path to the US, but today the good engineers are typically the ones who stay back due to the opportunity and the tier-3 engineers are really the ones looking to go overseas.
2. You can still find engineers at 12K/year but these would not be the ones who would architect your solutions!! The $35K engineer is the equivalent of someone you would probably pay $90K in Silicon Valley, so the 1:3 ratio is still true.
3. A lot depends on the employer - and companies who have setup shop directly are doing a lot better than companies taking the "easy route" of outsourcing. No pain, no gain - and those who have invested in setting up shop are able to attract and retain top talent.
4. the old "monkey factory" approach that was prevalent in outsourcing is fading away and engineers you can hire in Bangalore today are no different from engineers you would hire in the valley, albeit with less experience.
That's not to say that the burgeoining opportunity and rising costs arent issues - and there will be tasks that were sent to Bangalore that will now go to other parts of India or the world. Merely comparing salaries from 10 years ago is missing a lot of key but sometimes subtle points, when you are 10K miles away.
Cheers
SS
Great points. Far better to raise the salary issue to get this sort of response than ignore it (SS, I think all of your statements are spot on). But as someone who has watched the India, Inc. boom as an outsider -- but one with vested interests in it -- I do find the salary boom quite remarkable, even if I missed some of the subtle pieces of it earlier in my initial post.
Cheers, Jason