India’s Next Software Boom: A New Tryst With Destiny
Our software employment is going from 5 million to 10 million. Employers that win will radically revamp their people-supply chains.
India’s software industry may owe more to Ashtadhyayi—a 40-page document created 2,500 years ago by linguist Panini—than it knows. Programmer-turned-novelist Vikram Chandra’s book Geek Sublime: The Beauty of Code, the Code of Beauty suggests this lack of appreciation is postcolonial amnesia. Panini is not only an ancestor of modern linguistics but is deeply connected to today’s India because all software programming languages are in some sense dependent on his ideas and insights.
The Indian software industry—through a wonderful combination of luck and skill—will raise its employment from 5 million to 10 million within 10 years. We make the case that this war for talent will be won by employers who radically reimagine their people-supply chains in five ways.
India will export more software this year than Saudi Arabia will oil. Few economic models predicted leadership for a country with a $2,500 per capita income in this human capital-intensive industry. This leadership comes from a combination of luck and skill.
Luck includes the English language, overseas brain drain becoming brain circulation, rich country demographics, global fiber optic investment reducing communication cost while raising reliability, low global trust in China with intangibles, move from on-premises software to cloud, and the global capital glut.
Skills include low-fee IITs and IIMs, engineering deregulation in South India leading to India producing more engineers every year than the United States and China combined, effective Nasscom advocacy, and software technology park policy. Most importantly, as poet Sohan Lal Dwivedi said koshish karne waalon ki haar nahin hoti; they have continuously evolved with the market, surfing mainframe and minicomputers in the 1980s, client-server in the 1990s, the dotcom boom and Y2K in the early 2000s, and cost imperatives after the 2008 global financial crisis.
Now, Covid-19 brings forward enterprise digitisation investments and consumer digital adoption by a decade; all companies are technology companies and all commerce is e-commerce. And national work-from-home mandates have made international work-from-anywhere possible, attractive, and legitimate.
Software—an Indian labour market oasis of high productivity with only 0.8% of the labour force producing 8% of GDP—will hire across five kinds of employers:
Captive centers for product information technology companies (40%);
Third-party software service companies (40%);
Captive software centers for offshore non-information technology companies (10%);
Indian tech unicorns servicing global software-as-service markets (5%); and
Indian tech unicorns servicing Indian domestic consumption (5%).
This massive expansion has cascading implications for software employees (salaries, attrition, and skills) and the economy (productivity, foreign exchange earnings, and real estate).
This demand combines with employer needs (lower fixed costs, just-in-time staffing, changing skills, and bench unaffordability) and millennial attitudes (employment as a taxicab relationship rather than lifetime contract) to raise employee attrition to 33%, salary hikes to 50%, and bottom of pyramid hiring growing by 100%. More cooks in the kitchen are insufficient for this ferocious headcount expansion, employers need a different recipe.
We suggest five ways to revamp people-supply chains.
Too many IT organisations have let their organisational structures morph from pyramids to cylinders. Their lack of an up-or-out system has led to extra people in the middle and top. Sustainability, for costs and skills, lies in structures that do not revert the cylinder to a pyramid or hourglass but an Eiffel Tower because only two in ten programmers are capable of moving to leadership roles. The new structures will also reconfigure organisations for the secondary objective of remote work being a powerful tool to access labour market outsiders like women, people from small towns, etc.
Concentric Staffing Circles
Companies that win will think of themselves as five concentric circles. The innermost circle of permanent employees will work on projects or possess skills that are strategic for long-term business growth. The next circle consists of apprentices; they are getting training on the job and a large part may become core employees. The third circle consists of workers with fixed-term contracts directly with the company. The fourth circle consists of workers rented from other companies. The outermost circle consists of freelancers, consultants, or gig workers brought in when needed for non-critical, non-tenured work. The concentricity of the circles has no implications on their size or density and is size-agnostic. These concentric circles will make costs sustainable, improve diversity, and raise organisational metabolism.
IT companies can’t “manufacture” their own employees but winning employers will repair, prepare and upgrade. Skilling is shifting from high cost, physical and episodic to affordable, multimodal, and continuous. Edtech tools that require employees to self-learn, learn from each other, move mentor-mentee relationships beyond form, institutionalize learning check-ins, and update their employers will become unfair advantages.
Learning goals must become as important as performance goals.
Faculty must expand to include expats to transfer, download and institutionalize their technology. The software wage premium is large enough for experienced people from other industries; many people are willing to restart or reset careers but need different learning tools, plans, and career trajectories.
Freshers are the most sustainable model of pyramid correction, cost sustainability, and skill refreshing. The deregulation of engineering education decades ago was a useful disruption to our higher education system; the National Education Policy 2020 will make it even easier for software employers to work with colleges. Successful employers will embed soft and hard requirements into the curriculum and innovate at the intersection of education, employment, and employability. They will also access the pool of non-engineer freshers with different assessments, onboarding, and training.
The old adage of you don’t quit a company but leave a manager is supercharged by Covid-19. A TeamLease Digital survey suggests that for 48% of young people, leaving a toxic boss is their prime motivation. Successful employers will train software and project managers to be managers; many are having difficulty transitioning from doing things to getting things done from others. A key skill for leaders is managing expectations. Too many software managers promise the moon but deliver the earth in terms of clients, challenges, learning, skills, and projects. They also need to get better at inspiration and communication by reducing what psychologists call a “steep authority gradient”.
Ten years ago, Barry Eichengreen of the University of California, Berkeley, and Poonam Gupta, currently at NCAER, had suggested that India is unique as modern tradable services formed a significantly larger share of GDP than other countries at comparable levels of development. The export dematerialisation captured by Nandan Nilekani’s insight that ‘The World Is Flat” has played out but this party has just begun.
Author Arthur C Clarke once wrote, “Any sufficiently advanced technology is indistinguishable from magic”. Covid’s pain was blunted by the magic of vaccine development. India’s software industry hiring in the next ten years what it did in the last fifty years is also magic with wonderful implications for India’s economy, productivity, and jobs.
Manish Sabharwal is Vice Chairman and co-founder at TeamLease Services, and Sunil Chemmankotil is Head of Specialised Staffing at TeamLease Digital.
The views expressed here are those of the authors and do not necessarily represent the views of BloombergQuint or its editorial team.