A Sit Down With Kiran Karnik, Head of Nasscom
Wednesday, August 16, 2006SUSIE GHARIB: Companies around the world bought $17 billion worth of call center, software, and IT services from India last year. The business there is growing so quickly, some economists think it may be the start of a new wave of foreign competition for service work. Recently, Washington bureau chief Darren Gersh spoke with Kiran Karnik, head of Nasscom, India`s leading IT trade association. Darren began by asking Karnik where the biggest growth is in off-shoring.
KIRAN KARNIK, PRESIDENT, NASSCOM: The biggest growth rates are in the area of business outsourcing where the work down line, downstream you might say, which is largely commoditized work which tends to be (INAUDIBLE) the one that`s growing in large quantity. But interestingly there`sincreasing amounts of smaller work, but increasing amounts of work which is increasing sophisticated where you are using more and more what you would call domain skills. So if you`re doing, you know, not just invoices which come and go and you enter them and look at where they are. But you do analysis of those to look at analyzing what it might mean, looking at what it might mean to customer behavior and then using that to pattern new kinds of products which you might devise for markets.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: How many jobs are we talking about that might have been off-shored from the United States? Sometimes you hear examples, radiology, for example. Lots of off-shoring you hear is going on and then when you look closer at it, there was a study from MIT that says in fact there aren`t a lot of radiology jobs going over to India. So how many jobs are we actually talking about here?
KARNIK: You got to look at it differently, look at the total Indian IT industry. We employ 1.3 million people and off that if you look at the part that`s serving the domestic markets, that`s about 400,000. So you`re about 800,000 to 900,000 people working on the export of the IT industry and to put that in context, you might look at the figure and you can check those figures but I think there are about 10 million people in the IT industry in the U.S. So it`s about a tenth or less of that in totality and some of that is geared to work for Europe, for UK, for Japan. So it`s not as large as you might see from some of the media reports.
GERSH: It sounds kind of amazing to think about this in a country of over a billion people, but I`ve heard from different sources that India is actually facing a labor shortage, a shortage of high quality workers who can interact with the "Fortune" 500 companies in the United States. Are you facing a labor shortage? And what`s it doing to your industry?
KARNIK: Well, there are concerns and this may seem almost paradoxical, because not just the one billion people, but the fact that we generate, turn out almost 3 million graduates a year and something 400 to 500,000 engineers and technical graduates every year. The problem is that not all of them fit into the skill set that you need for a global industry which is language skills, communication skills and a certain minimal quality of, you know, technical and other skills. The result is we find that then we look around and project the future, our studies show that we might have a shortage of as much as half a million people. That`s important to understand that that`s on a business as usual which I don`t think they`re going to let happen. Anyway, it`s a good problem to have. It`s a problem of success, so it`s better problems of success than problems of failure.
GERSH: Are prices going up?
KARNIK: Absolutely and this is completely related to this factorbecause, you know, you have a supply/demand mismatch and the shortages or possible shortages of top end human resources are driving up wages by 10 to 15 percent a year.
GERSH: Now Alan Blinder, a very esteemed economist here in this country wrote an article recently that got a lot of people talking about off-shoring. He said basically you ain`t seen nothing yet. We`re going to get to the point where 28 to 40 million service jobs in this country could be at risk of being sent off-shore as IT deepens and develops. You hear a number like that, it scares a lot of Americans. When you hear a number like that, do you think it`s reasonable, realistic? Are people too worried in this country or not worried enough?
KARNIK: I think all projections and these are optimistic, but I think we realize they`re projections. We`re saying that by 2010, light industry in India will employ 2.5 million people compared to 1.3 million people today. So you`re talking a million people more in the next five years. So I think there`s a degree of calculation done in a different way, let me put it that way, to these figures like 28-30 million.
GERSH: All right. Kiran Karnik, the president of Nasscom, thank you very much for your time.
