I’m really not the kind of person who does doomsday predictions, but I simply have to make this one: it is the beginning of the end for software development outsourcing to India. There is not one but many factors that now come to a head; in fact it looks so uncannily like a Seldon crisis.
[Note: this post is too long and probably controversial. Flames welcome. Comments are not moderated.]
The story goes like this: India started to become a successful destination for software development outsourcing somewhere in the later half of 90s. By 1998-99, it became apparent to lay public that software engineers drew salaries like king’s ransoms and traveled abroad in business class — things that the previous generation couldn’t have done even with a lifetime’s dedicated employment.
The engineering graduate education situation however, was a tough one during those days. A state would turn out only maybe 450-500 computer science engineering graduates a year, and literally millions would write an entrance exam to qualify for a seat every year. Passing the engineering entrance exam (with a good rank that too) was possible only for talented, committed, hard-working students. And this reflected in the quality of engineering professionals that filled the ranks of software shops in Bangalore and elsewhere. They did a good job obviously, resulting in success stories of outsourced software development that made profit-minded capitalists sit up and take notice half a world away.
The meager annual supply of professionals, however, was not sufficient to meet the demands of the booming software industry. Enterprising people were quick to setup engineering colleges, and in a few years, the number of CS graduates jumped ten-fold, to 5000 per year. Yup. Ten-fold. However, (i) where did the extra people come from, and (ii) where did they get the teaching staff to teach these extra people?
The extra people came in not (significantly) because more people wrote the engineering entrance, but simply because the threshold was lowered (since now there were ten-fold more number of seats per year).
The extra teaching staff reality is a bit more pathetic. Mostly, the previous year’s graduates who could not land a job anywhere took up this task. Of course, surely this was not always the case, still every new college had a few such “young” lecturers.
The end result was that you now had 5000 graduates a year, of which 500 would actually be talented, committed and hard-working. Some of the rest could be trained and would be useful in the long run. Most of the rest would end up being a liability to the organization, having to be “hidden” “on field”.
Thus organizations evolved from 1998-2008, with their core, competent teams getting diluted by a constant influx of progressively less competent, less committed graduates. Organizations now need to have extensive, academic-like training/induction programmes. Senior (“old”) developers need to spend more time mentoring/directing/instructing “new” developers than before. The senior devs act as “seeds” around which teams gets built. All the while the ratio of pre-boom-era developers to the gen-x-era developers keep decreasing.
This process has now reached a point where it is no longer profitable for organizations to continue in this fashion. Teams have become unmanageable, unproductive and the business is on the brink of being unprofitable. Organizations that can come up with and employ radically different approaches towards building and sustaining productive, balanced, high-performance teams would probably survive. Big, bureaucratic, process-driven organizations would probably flounder. In less than 2 years. Yeah. That’s a prediction with my name on it.
But there are other factors too that support the prediction. Today, more than ever, the talent of Eastern Europe and China is accessible to the western world. The break up of USSR and the “opening up” of China (to whatever extent) made this possible. It now also makes possible the offering of a dev job to Hungary what would earlier have been definitely to India. It pains me to accept that they’d really probably do a better job of it.
The US economy, after many years, is in recession again. This would further affect the jobs that get outsourced at all from the US. And probably a few other countries too.
There are some more factors too, for which I don’t have space on this post — how pioneering organizations have become bureaucracies, how people-orientation has given way to process-orientation, how Bangalore infrastructure has collapsed totally, how the support professional groups (HR, IT, adminstration) are struggling, how dismal the hiring/head-hunting scene has become.
And therefore, my prediction, again:
This is the beginning of the end. Within two years, major earthquakes will spoil the dream run of the Great Indian Outsourcing saga. The industry will become sober, mature, and will leave quite a few in tears in the process.