Indian IT industry  IT manpower

With a slowdown in the economy of its largest customer, namely the U.S., the rapid revenue growth rates of 30%-40% that it has experienced in recent years is threatened. It is faced with a strengthening Rupee, something the Indian economy has not had to deal with ever since the socialist period extending from the 1950’s to the 1990’s (although Japan successfully dealt with a similar situation when the automobile export industry remarkably resurrected itself from the strengthening yen by shifting manufacturing into the U.S.). Finally, the software industry is faced with an increasingly felt shortage of suitable technical talent. God, in the form of Vishnu, the protector, had to reinvent and reshape his form to address the unique challenge faced by Hiranyakashyapu; this is what the software industry too needs to do, he said.

The industry has taken several steps to address the shortage of technical talent in the major metropolitan cities where the Indian software industry has been primarily based. Historically, the industry grew its resource pool in the major metropolitan cities of Mumbai, Delhi and Chennai, as well as Bangalore. It attracted talent from the rest of the country to these locations. In this context, it must be pointed out that India has 28 states each with a different language and significant cultural differences. In fact the basis for reorganization of the states after independence in 1947 was the language grouping principle. This means that migration is a little harder than in countries with a single language and culture. In order to be able to achieve growth rates of 30% or more per annum in revenues and profits, the industry turned to setting up campuses in smaller cities; specifically Hyderabad and Pune. The past five years have seen huge growth in software and IT enabled services growth in these two cities which are a little smaller than Bangalore in terms of population.

Now, however, the industry has moved into what have traditionally been referred to as “tier-2 cities,” such as Nagpur, Chandigarh, Mysore, Coimbatore and Calcutta. The last is surprisingly included within the same category as the others even though it is a large metropolitan area. The reason is its communist government and perceived anti-industry attitude which extended from the 1960’s to the 1990’s and saw a large exodus of manufacturing jobs from the region; an attitude that, it should be mentioned, is now softening somewhat under its current chief minister.

These tier-2 cities have a high degree of livability, good educational institutions and a population that does not necessarily want to migrate to other cities. Thus, significant quantities of technical human resources are available within these cities; all that the software industry players need do is set up facilities locally to draw upon that talent. An important benefit, from the companies’ perspective, is the lower cost of living in these cities which permits lower salary levels. The following extract from one website illustrates this difference. Note that the corresponding salary figure for Bangalore, given the conditions presented below, would be around Rs 650,000 per annum.

The principal reason for lower costs of living in these cities is the cost of real estate. The cost of purchased housing (apartments or condominiums) in these cities is about half that in the distant suburban areas of metropolitan cities. Bear in mind that housing constitutes almost half the budget of most middle class people in India. The other reason for the lower cost of living is transportation. Commuting distances from home to work and back in the tier-2 cities can be one third to one fourth of that in large metropolitan areas. The metropolitan cities generally have better public transport but software “techies” quickly graduate to personal transportation, either in the form of a motorcycle or automobile. As such, these transportation costs can make up a significant part of their monthly budget.

Despite their smaller size, however, these tier-2 cities are all state capitals and the ones attracting software industry firms and IT-enabled services firms have several good educational institutions, including engineering and science colleges. They also have schools that deliver education in the English language to impart fundamental language skills and a global outlook.

In addition to a lower cost of living and a good supply of technical skills, these cities also have good connectivity to the rest of the country and internationally. For instance Nagpur has seven airlines serving it with some 34 flights per day and 18 international flights per week. Similarly, Chandigarh has 8 flights daily. Nagpur is well connected by rail and road, being at the intersection of national highways NH6 (East-West) and NH7 (North South). It is also on the main railway lines connecting the north-south and east-west. Chandigarh is well connected with Delhi by road – just a short 3 hours away.