Skills Gap Hurts Technology Boom in India

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.

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.

While the best universities in India can compete with any in the world, overall the Indian educational system is lacking. If outsourcing and the rise of the IT sector is causing it to improve, that is a good thing.

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.

So much for the idea that all IT jobs in the US are going to India. While outsourcing is real, its extent has been over blown. As demand for workers increases, the wages will go up with them. As wages increase, the cost advantage of outsourcing (and the reason for outsourcing) to India will go away.

via NYTimes