India's skills shortage: A nice problem to have?

In recent years India has become a haven for companies looking to cut costs by signing offshore outsourcing agreements.

Companies such as British Airways, ebookers, Oracle and Stepstone have already realised the potential savings to be gained from using cheaper labout, which is arguably just as skilled as their domestic workforces. Many more companies are likely to follow suit.

As such, India is faced with an enviable crisis - the prospect of having far too much work to go around. In number terms the shortfall is likely to be around 250,000 jobs by 2008.

However, India may find sympathy hard to come by from countries such as the UK, where lay-offs in the high-tech sector over past year have been the norm.

But on one level this situation is indicative of a problem which many countries face and there are serious underlying issues.

A large proportion of these jobs will go unfilled through a lack of training - not through a pure lack of numbers. Skills shortages are very rarely any guarantee of full employment. They tend simply to indicate a gulf between supply and demand on an education and training level.

The much-hyped skills crisis in the UK a couple of years ago was largely a result of people being too slow to retrain, or employees being too slow to realise the benefits of retraining staff.

But with India it is more the case that rapid expansion alone has brought about this shortfall. There really aren't enough people applying to the jobs: it's not that they're ill-equipped to do them and therefore unemployable, as is the case in other parts of the world.

One thing is certain: the skilled nature of the workforce, and the realisation that even more training and more resources are needed, means the Oracles of this world will continue to be tempted to outsource to India when looking to trim costs.

But for how long? When supply cannot meet demand, prices rise. Indeed, Nasscom, the company which carried out this research, has already found that the wages of Indian high-tech workers have risen eight per cent in the last year.

So while the country has a nice problem for now, economics dictate that the key benefit of offshore outsourcing - cheaper labour - will no longer exist.

Could India become a victim of its own success?

silicon.com is running its fifth annual skills survey at the moment. Do you have unfilled vacancies? Are your own skills in demand - or out of date? Help us generate a detailed picture of the IT workforce by filling in our short questionaire. You could even win a bottle of champage for your pains.