Daily Archives: July 26, 2007

India has Problems Too

With all the negative attention that China has been getting lately, I only thought it fair to point out that before you think of jumping ship to one of its closest neighbors, India, it also has its share of problems.

According to Speeding Up, but still not ahead in the Business Standard, despite their increasing presence in the global market, the Indian IT firms still have a way to go before they can play with the global giants.

The reasons for this are the rupee appreciation (it’s worth whole cents now!), wage inflation (since all of the IT outsourcing has increased the size, and wealth, of the middle class), high attrition rates (still not enough skilled talent to meet demand), and skill shortages (an estimated shortage of almost 500,000 qualified employees by 2009).

Then there’s Is India Too Big to Fail? in Knowledge @ Wharton, which reviews Edward Luce’s In Spite of the Gods: The Strange Rise of Modern India which notes that India is holding itself back because of an unwillingness and almost inability to take decisive collective action.

This is partly due to the fact that it seems that India has given a higher priority to stability than it has to efficiency. But likely more due to the fact that India has a deeply entrenched culture of pluralism. Whereas China has one script, one official language, and very little religious division, India has 18 official languages, several different scripts, and deep religious and caste divisions. Makes it very hard to even contemplate agreement, let alone reach one.

And there’s The Dark Side of the Moon: The Downside to India’s Economic Rise which reviews Niranjan Rajadhyaksha’s book The Rise of India. The article starts off by pointing out, as highlighted in the book, five major issues that India has to deal with if it wants to become a true player in the global economy: poverty trends (at least 25% of its population live below the poverty line), income inequality (all of the outsourcing has created a middle class that is almost rich in comparison), energy (it is a high-octane economy that has to import over 70% of its petroleum), employment (not enough skilled people to meet needs), and infrastructure (not near enough).

I could go on, but I think you get the picture. There might be challenges in dealing with China, but challenges exist with every off-shoring and Low-Cost Country. So don’t jump ship just because the boat starts to rock. Do a careful comparison of the advantages and disadvantages, build a total cost and a total value model, and perform a careful analysis before making a decision to go to a new off-shoring destination. Even if you run into problems now and again, staying the course might be the best thing to do.