Econ 101 Works… Eventually

With all the brouhaha about outsourcing last election season, I thought this article provided an interesting snapshot of what techie outsourcing looks like today –

Silicon Valley has helped power India’s outsourcing boom by shifting technology jobs to that country. Three months ago, Munjal Shah reversed a bit of that shift.

Shah, who leads a California start-up called Riya Inc., had opened an office in India’s technology capital of Bangalore in 2005, hiring about 20 skilled software developers. The lure was the wage level: just a quarter of what experienced Silicon Valley computer engineers make.

Then Indian salaries soared. Last year, Shah paid his engineers in India about half of Silicon Valley levels. By early this year, it was 75%.

75% of an average US Engineering salary goes FAR in India. Nevertheless, the big picture point remains true — salaries eventually normalize around productivity and, given the fiercly competitive global tech market, infinite pools of 3rd world workers aren’t exactly lying in wait (of course, the right policy mistakes can make this happen, but let’s not go there for now). It is, on the otherhand, pretty impressive and a testament to modern tech + capitalism that it’s happened this fast.

My company, Roundbox, has some similar, interesting anecdotal experience with outsourcing…

We started our operations ~3 yrs ago with an offshore office in India which was ultimately staffed up to about 10-15 folks. And, we also eventually closed down the office for very similar reasons to Munjal Shah @ Riya and the reasons documented in the article —

  • Cost: It wasn’t much cheaper than having folks in the US. As a venture funded startup, much of the attraction to outsourcing was, obviously, about getting the most mileage out of precious working capital. And it was getting more and more expensive every 6 months –
    Nasscom puts wage inflation in its industry at 10% to 15% a year. Some tech executives say it’s closer to 50%. In the U.S., wage inflation in the software sector is under 3%, according to Moody’s Economy.com.

    …an average $5,000 annually for a new engineer with little experience — the experienced engineers Silicon Valley companies covet can now cost $60,000 to $100,000 a year. “For the top-level talent, there’s an equalization,”

  • Churn: The massive boom in Desi tech meant that turnover rates for employees was becoming greater than even Silicon Valley. For complex tech, turnover KILLS.
    Pervasive Software Inc. in Austin opened a Bangalore unit in 2004 and hired 45 people. But soon its annual turnover was more than 25%, says the company’s CEO, John Farr. The company kept investing in training workers only to see them leave.
  • Name Brand Hiring: For a variety of reasons, there’s a strong preference for namebrand MNC’s amongst the tech talent in India and, as a new and thus unknown tech company, we couldn’t compete against the Wipro’s, Google’s & Microsoft’s when it came to hiring. In the US, on the other hand, quite a few young, ambitious folks would rather try their luck with a startup vs. going to IBM. Eventually, perhaps, Indians will feel, as their silicon valley brothren do, that “I can get a job at IBM anyday” but until that level of security is felt in their bones, risk tolerances won’t be where it is here in the valley.
  • Quality: Perhaps most controversially, the quality just wasn’t all there. Many of the folks were no doubt fantastic, but too many of the famously touted “500,000 tech grads a year” were a notch or 2 below many vo-tech educated folks here in the US.
    In a 2005 study, McKinsey & Co. estimated that just a quarter of India’s computer engineers had the language proficiency, cultural fit and practical skills to work at multinational companies.
    But in our case, it wasn’t just language but actual core computer science. The ones who were truly as good as the folks we had in the US could easily command… a US-level salary. Return to square #1.
  • Communication: Famously, outsourcing works great if your product specifications are tightly defined, with crisp clear milestones and well understood, a priori, secondary requirements. Just about every one of these simply ain’t the case in a startup tech environment. When your requirements can’t be clearly stated, management overhead grows exponentially… and once again, in a startup, lack of overhead is supposed to be your competitive advantage –
    Kana Software in Menlo Park has one engineering manager for every 25 to 50 engineers, but it found it needed one for every five to 10 engineers it employed in the Indian city of Chennai.

While there are tons of examples otherwise…. at least in our limited experience, outsourcing to India didn’t work out. Perhaps there were little tactical things we could have twittled with to eventually find an arrangement that could work but, alas, we didn’t have time….

Moral of the story – global trade and old fashioned econ 101 has created a pool of folks in India who make some pretty serious dough – even by US standards.

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96 thoughts on “Econ 101 Works… Eventually

  1. Well, India is certainly getting more expensive across the board. As a consumer, it’s no longer the bargain it once was. People’s higher salaries are doubtless contributing to that.

  2. There is still a lot of scope for outsourcing.. It’s still the beginning of a global market. The number of viable tech grads is only going to increase in India, with all the demand around. And it’s not just Bangalore to look at. Ofcourse, there needs to be a good business plan for any outsourcing venture to work well. I see a lot of potential for high-end outsourcing in the areas of finance et al. It already started with many cos. moving out of NYC to low-cost areas like Buffalo, Cincinnatti..

  3. Quality: Perhaps most controversially, the quality just wasn’t all there. Many of the folks were no doubt fantastic, but too many of the famously touted “500,000 tech grads a year” were a notch or 2 below many vo-tech educated folks here in the US.

    My brother-in-law’s start up had serious issues with this as well, particularly when it came to quality and work ethic. Their Indian vendor had issues with attracting the right type of talent (not top tier) and with that came the quality and work ethic issues. It seemed when a project was 90% finished, people considered it a done deal. The expectation was always 100% done, not almost done. I think they eventually pullled the project from India and had a few Russian guys here take care of it for more money, but timely delivery of quality finished product.

    An uncle who’s invested in Indian tech companies also had problems with odd requests. A parking spot and getting paid more than a neighbor were certain demands. The parking spot was generally not used, as the employee came to work on a two wheeler. He needed it to show families when scoping out prospective brides that he has a parking spot for his car (a status thing). As a retort to the demand to be paid more than his neighbor, my uncle told the guy in the interview that he was lucky Bill Gates wasn’t next door, else his company couldn’t afford to pay him a few rupees more. The dude didn’t really get the joke – he was dead serious about being paid more and his skills were in demand. Supply, demand, supply, demand, supply…

  4. The real issue is lack of infra-structure and inability to scale.

    Obviously investments in education and training have to deepen, there need to be 10X more high schools, 2x engineering colleges, etc. Unfortunately, the political system doesn’t support that, people are unable to demand this change, we still have an over-cautious economic system that focusses on maintianing the status-quo — it has taken 20 years for Bangalore to construct a new airport (not ready yet!).

    So there you have it. A small pool of people will do well but the opportunity for larger change will pass india by.

  5. Yes, for America/Americans I can put forth all different arguments as to why outsourcing/offshoring may be bad for them. For Indians and other poor countries – yes they have a long way to go in terms of quality and have to learn a lot. But there is nothing to be ashamed or feel sorry for what India is doing. It is all fair in the name of laissez fairre. Do the dirty work today but keep aiming high and one day you will be there. It is just like the poorly educated parents/grandparents in India who toil with menial work to be able to give their children better education.

  6. there need to be 10X more high schools, 2x engineering colleges, etc

    Actually, its not quantity thats needed, its quality. Being a product of that system, I know how woefully inadequate an undergraduate or graduate degree from India are (from all but a handful of institutions). The desi education infrastructure is geared to produce hundreds of thousands of so-so graduates. In response, Wipro and Infosys have developed world-class training programs to catch their recruits up to speed.

  7. I was talking to my dad about this. He lives in Bangalore and is retired. I asked him if he had to choose between a job in Bangalore and one in the US for the same pay, which would he choose. He said the one in the US anyday – the daily aggravations from pollution, corruption, traffic were just not worth the extra moolah to him.

  8. Regarding ‘Name-Brand Hiring’

    The biggest area where start-ups lose out against well-known names is Campus Recruitment. The number of people Infy/TCS/Wipro/Accenture/IBM pick up from single colleges alone is a staggering figure. For instance, 150-200 from my undergrad College were offered jobs at TCS, 100 for Infosys, and so on. At the end of an engineer’s final year, 90% chances are that he has been successfully ‘placed’. Even if he didn’t make it into the big names like Microsoft/Google , there is enough ‘prestige’ associated with Infosys / TCS /Wipro in society for an engineer to gladly join them.

    Ultimately, the only people in Bangalore who are out there searching for jobs are people who didn’t make it from college, and that already says enough about their quality, considering how easy it is to get a job in college. Start-ups going off-shore is really a bad idea, because there is no way they can attract the cream of the crowd.

  9. I think safety of jobs and resources is an important factor for most Indian job seekers and working for start ups may be akin to satisfaction top level of needs per Maslow’s hierarchy (self actualization), it will be a while before graduates in a country like India will place the same value to start ups and established brand names

  10. In India for profit undergrad institions have cropped up everywhere…many of them are crap.

    The major reason that Indians don’t want startups, no matter how “hot” the firm is in the valley, is because a young man’s value on the marriage market is based to a large part on the global brand recognition of the employer. “Boy works for Cisco/MSFT/TI/GE/Google” is more likely to get the lemurian head waggle of approval than “Boy works at Riya/Roundbox”. For the most part engineers who are eager to join startups are “US returned” and know the game. Interestingly the salaries for what I would consider more intellectually demanding work (RF circuits, DSP, comm systems design) seems to be lower than what the run of the mill code/test guy gets

  11. Ultimately, the only people in Bangalore who are out there searching for jobs are people who didn’t make it from college, and that already says enough about their quality, considering how easy it is to get a job in college.

    But aren’t we discussing people who might also be switching jobs?

    The major reason that Indians don’t want startups, no matter how “hot” the firm is in the valley, is because a young man’s value on the marriage market is based to a large part on the global brand recognition of the employer.

    I think the reasons go beyond the marriage market value. But it does happen, I am reminded of my mom’s insistence that I get a better job at a “bigger” (read name brand) company. Trying to explain the benefits of working for a small company doesn’t change her opinion!

  12. SkepMod Actually, its not quantity thats needed, its quality.

    Vinod, do you know what technical tasks your company was actually outsourcing? I would imagine it was the implementation of designs based on broad specifications that people here came up with, but are you able to elaborate?

    On the quality thing, here’s an interesting article: Coaching Factories are Dumbing Down the IITs and Feedback on it. I can hardly imagine the situation being any better anywhere else. BTW, you might need to login to access the article, though it’s free – the April 30 2007 issue of Outlook India.

    TISCO, among others, has stopped recruiting at the IITs.

  13. Reading the comments, I get a feeling that most people see outsourcing as one process with single business model. Labor arbitrage (if we consider that to be the biggest factor contributing to outsourcing) can be used in multiple ways to the organizations’ advantage. For instance, Start-ups starting their own set ups in India does not make sense from any perspective. Difficult to recruit, no brand name, no job security etc etc. Why should a graduate, good quality or otherwise, choose an option where he/she sees a lot of negative. Esp. when they have alternatives? Ideally, Start-ups thinking about outsourcing should tie-up with the larger firms, Infy/TCS/WIPRO/CTS/Satyam or others. That gives them the advantage of outsourcing, while getting assured quality from these firms.
    It is important to realize that the opportunity of outsourcing is huge across the globe. However, like any other business, there are multiple issues to tackle before succeeding. Setting up office in India (or China or Lat-Am or Eastern Europe) is the easiest of steps.

    As far as the thought that boys / men seeking jobs to enhance their “position” in the marriage market (louiecypher, did you refer to girls as well?)… Guys, please wake up. Do you frankly believe that a normal educated guy, in the US or India, seek jobs to get a bride? Come on. Next thing I hear is that they ride an elephant to work and charm snakes as a hobby.

  14. @KarmaByte #11: “But aren’t we discussing people who might also be switching jobs?”

    Mostly, the situation is one of the two:

    1) You get into a ‘services’ job like Infosys/TCS/Wipro. At these places, you need 2-3 years before you go ‘on-site’ which is basically the cauldron of gold at the end of the rainbow. People slog it out for a crappy pay just so they can finally smell the US/UK $$ .. Once they reach these shores, they try to remain there for as long as possible… or switch to another job because of their H1B status.

    2) You get a ‘products’ job like SAP, Microsoft, Google, GE – These companies are huge on the ‘brand’ factor not only for desis but for almost everyone in the s/w market. It’s hard to displace these guys from their jobs because they are happy with pay/brand/ and treatment.

    Ultimately, a start-up will have to attract people with 3-4 years experience(since they couldn’t catch them ‘fresh’) and by that time their values on the market would be so high that it doesn’t make sense being off shore in the first place.

  15. Vinod, it’s a bit reductionist to look at relative differences between national macroeconomics and then try to argue for normalization in the global economy. I understand where you’re going with this, but we have yet to see if this extends to other regions, if this just means that industry will move again to the lowest cost labor market (when possible), and if this spurs inflation, wealth disparity, and lowered relative standards of living for those who are not lucky enough to make it into the outsourced pool.

  16. “Boy works for Cisco/MSFT/TI/GE/Google” is more likely to get the lemurian head waggle of approval than “Boy works at Riya/Roundbox”. For the most part engineers who are eager to join startups are “US returned” and know the game.

    Oh, I’m sorry I missed this the first time. I was going to say that I don’t think it’s just the marriage market aspect; it’s a combination of “name brand’ism” and the idea that maybe, just maybe, a person could work their way up into leadership or even into international travel/placement.

  17. As far as the thought that boys / men seeking jobs to enhance their “position” in the marriage market (louiecypher, did you refer to girls as well?)… Guys, please wake up.

    I’m completely awake. And yes this is part of the reasoning for many, but not all. If you want to dismiss this idea as the creation of white dudes go right on ahead. Better job equals more desirable girl+heftier dowry for people who come from families where dowry matters (i.e. most of the middle class). I don’t want this to get sidetracked, but you are simply going to exhaust yourself if you take on the role of India’s PR/media agent.

  18. Remember the 90s when every other moron would get trained in SAP , lie on the resume, get hired, somehow survive on the job, and make twice what an accomplished C++ programmer would make and then act like he is God’s gift to womankind.

  19. Oh, I’m sorry I missed this the first time. I was going to say that I don’t think it’s just the marriage market aspect; it’s a combination of “name brand’ism” and the idea that maybe, just maybe, a person could work their way up into leadership or even into international travel/placement.

    Which of course will lead to more money and greater desirability as a potential son-in-law. I am not denying that there are other factors, but unlike in the US parents play a huge part in their adult children’s employment choices. Parents even expect employers to maintain the “virtue” of their umarried adult children

  20. I was in B’lore earlier this year trying to recruit for my startup and my experience largely mirrors those of others, viz., top quality engineers are hard to find and are paid well, which is much like my experience in the Valley.

    The hiring scene in B’lore reminds me of the last fondly remembered boom (please god, just one more bubble), when anyone who had read ‘HTML for Dummies’ could ask for and get a six figure salary. Give it another few years for the tech job market to mature in India, and companies will have a presence there to find the globally best, rather than globally cheap, talent.

  21. Which of course will lead to more money and greater desirability as a potential son-in-law.

    on a lighter note, too bad it does not work as well the other way round. I’d like to see an Indian woman who gets a hot man and a hefty dowry by virtue of google/MS/etc 😀

  22. Vinod: >>at least in our limited experience, outsourcing to India didn’t work out. butterchicken: >>I was in B’lore earlier this year trying to recruit for my startup

    Small companies in the present-day scenario are better-off by not going to the open-market to hire people. They will get poor quality people without staying power. They are better off hiring someone they know, a friend’s relative, a relative’s friend, a cousin, neice’s fiancee, etc etc. They can convey in a personal manner as to what the expectations are, and they will usually be met. Turnovers will be minimal – if any.

    Of course, once they grow larger in time (3+years/100+people), they will have to go to the open market eventually, and face the problems Vinod describes.

    M. Nam

  23. Captive BPOs have only been successful in large companies. Most small companies have achived economies by outsourcing to third party vendors like Infosys, TCS, L&T etc. Important to note that the bigger Captive BPOs such as British Airways WNS, GECIS etc. have been spun off in the past. It may be economical for start ups to work through third party outsourcing channels in the short run.

  24. on a lighter note, too bad it does not work as well the other way round. I’d like to see an Indian woman who gets a hot man and a hefty dowry by virtue of google/MS/etc 😀

    Hey.. all you lovelies working at google, you can have me and my daddy’s jaydadad as dowry anyday. Just help me with my coding in the night, I know how to cook too!

  25. dude lucifer, what you said is basically a very trivial thing. Any person that is single would naturally care about making themselves look better to attract potential mates, and the job that one holds is quite naturally an important part of the person’s profile. So, stop belaboring that point so many times as if its a critical insight from your sharp brain on the subject matter

  26. stop belaboring that point so many times as if its a critical insight from your sharp brain on the subject matter

    Random – no random insults cast @ other mutineers, please….

  27. chachaji,

    Its so specious of you to include that tidbit about tisco stopping recruitment at IITs as a pointer to their low standards. tisco could have stopped recruiting for a variety of reasons. I’m guessing it would be far too haughty of them to simply proclaim that iit grads fall below their standards. (Its possible, though, that the standard of those who would be willing to take up their job offers might not be satisfying enough for them)

  28. Famously, outsourcing works great if your product specifications are tightly defined, with crisp clear milestones and well understood, a priori, secondary requirements. Just about every one of these simply ain’t the case in a startup tech environment. When your requirements can’t be clearly stated, management overhead grows exponentially… and once again, in a startup, lack of overhead is supposed to be your competitive advantage

    Absolutely. Whereas application outsourcing of established applications will continue to be offshored because the numbers will continue to work in favor of offshoring. No arguments with some of the observations on quality etc made here but the fact is that there is still a huge market for offshore/outsourced services

  29. Random- I’ll ignore your insult. Do people seek jobs that maximize NPV across all cultures ? Yes of course. What you have failed to comprehend (I won’t seek a cause in nature or nurture), is that people oustide of the industry (i.e. prospective in-laws, parents) don’t have all the information and make NPV calculations based on limited knowledge. And that these outsiders play a huge part in the decision making of the average Indian twentysomething in a way that they do not for their American counterparts. Mummi/Daddi will explain to you, wokay ?

    For all the talk about Indian technology innovation, risk aversion manifests itself in quantifiable ways (e.g. the hundreds of millions in India earmarked VC funds that are now being redirected from non-existent/poor quality Indian startup deal flow to “sure things” like services, hotels & infra)

  30. And yes this is part of the reasoning for many, but not all.

    And how did you figure that “many” think that way? Why do you think it is not just a “few”? 🙂

    Better job equals more desirable girl+heftier dowry for people who come from families where dowry matters (i.e. most of the middle class).

    In the population segment where dowry matters, the salary of the boy is more important than the name of the company. So, this logic is not entirely true.

    but you are simply going to exhaust yourself if you take on the role of India’s PR/media agent.

    Making a straw man, eh!? What makes you think that I assumed that role 🙂

    All I am saying is that 1) for a guy out of college, marriage is the last thing on his mind. 2) Parents hardly have an influence on the the choice of jobs. If anything there is a lot of peer pressure. 3) Choice of job is based on a number of dimensions – marriage is definitely not the top-most for most of the candidates. (This I speak from my experience of two premier academic institutions and 8 years of watching a lot of people entering the job market).

  31. “Do you frankly believe that a normal educated guy, in the US or India, seek jobs to get a bride?”

    Why does any guy anywhere do anything if not to get the girl?

  32. Some counterpoints

    Cost: This talk of rising salaries is extremely exaggerated. In most IT biggies like Infosys, Wipro, IBM, 60-70% of the employees have less than 2 years experience, and would be getting paid about Rs 2-3 lakhs a year (about $5000 to $7000). On the other hand a similar graduate in the US would cost a minimum of $60000. Obviously there is a huge arbitrage opportunity here and not going to disappear anytime soon

    Churn: Startups may have 20-30% churn, but most established biggies claim they have less than 10% churn. Most engineering classmates of mine are still working for their first company, and its been 3 years now

  33. louiecypher: And that these outsiders play a huge part in the decision making of the average Indian twentysomething in a way that they do not for their American counterparts. Mummi/Daddi will explain to you, wokay ?

    How condescending to think that getting a good dowry is the ruling principle of all, or even, most, guys deciding on jobs. Perhaps this is the chance those guys have to escape a lower or low-middle class existence, and they really don’t want to fuck it up with a startup which is likely to fail as most startups do.

    louiecypher: For all the talk about Indian technology innovation, risk aversion manifests itself in quantifiable ways (e.g. the hundreds of millions in India earmarked VC funds that are now being redirected from non-existent/poor quality Indian startup deal flow to “sure things” like services, hotels & infra)

    Any data here? And since you said ‘e.g.’ perhaps some other examples to shore up your point?

  34. BigJoeChang “Do you frankly believe that a normal educated guy, in the US or India, seek jobs to get a bride?” Why does any guy anywhere do anything if not to get the girl?

    🙂 I concede to that.

  35. The “problem” of increasing Indian salaries has been brewing for a while. As somebody points out, the Indian system churns out a large number of college grads, many of whom have had only a mediocre education, and despite all the training systems etc. that the companies set up, they are running out of qualified employees to hire. In fact, many of the Indian outsourcing giants like TCS, Infosys, and Wipro have now started looking at getting into the Chinese outsourcing market in a big way. In these companies, the Indians get to be the bosses, and the Chinese graduates the coders.

    “Random”, louiecypher is an extremely perceptive, articulate, single, eligible male (except for his libertarian leanings, but nobody’s perfect), there is no reason to call him the devil or insult him in other ways. I can say from personal experience that name branding is a big deal in India, when I went to India after I found a job, I got a lot of questions namechecking the top companies, and polite murmurs when I told them the details of the startup I chose to go to. I think this was way before marriage was on the horizon, or maybe, this is why the sun set on that idea (notice the genius continuation of the horizon analogy?). Who knows?

  36. we couldn¿t compete against the Wipro¿s, Google¿s & Microsoft¿s when it came to hiring.

    Don’t know about your company but someone I know recently went back to start an offshore center for a EE startup. Dude’s constant complain is that his company does not provide any of the risk based benefits like lucrative stock options that one gets when one goes to work for a startup. Thus neither is there the stability of a big company nor are there the benefits that may come if the risk pays off. There are only so many people he can find for the lure of ‘high quality work’. Needless to say, masses in India have not forgotten the pre liberalization doldrums and thus job security is still important to a lot of them.

    For that matter, DBDs who come here still go for companies like Intel and Microsoft though the work there is usually shite – all for the stability aspect. Sure the problem is exacerbated by the immigration rules…

    Louiecypher –

    You may have a point, there may be cases/communities where people think more from the marriage market perspective. However, as a general trend I am not as sure that marriage is THE concern for a brand name job, it might at best be a passing concern.

  37. Also, the problem with inflationary salaries is definitely there. However, praise the Lord of Market Forces and put your trust in Him (or is it a she!!). If this is a bubble, it will burst. My guess is that it will just stabilize – the people who are good and are indeed at the same productivity level will demand top notch salaries, probably a couple of notches below American salaries but not too much below (there are plenty of returnees these days who are quite qualified and productive – also, think IBM, Intel, MS, Google research labs in India) and there would be the true oursourced work masses who will not be able to command as much, but still the work will be there and the salaries will reflect the true worth of the work. People will be paid based on the value they bring to the chain – be it in India, China, Europe or the US – globalization will work both ways.

  38. Fresh graduates don’t know/realize how appealing startup work is (actually they have no clue at all). Even if they know about the startup, they are not willing to join some no-name company. You can offer them 50% of Silicon valley salary, they won’t join a startup. Getting a placement is a big deal when they are in college. They like to brag “Machi, I got placed in Infy da” and start courting the hottie (or not) placed in same company from his college. Name-brand hiring!

    Once he is there, he has to fight (compete is a weaker term) with 10,000+ people to get his annual rise. If he doesn’t get it, he moves on. You can’t do this easily with startups, right? If a startup wants to keep the trained, they have to hike the salary. There goes you cost factor! About quality, there is no way any startup can attract and keep the best talent (all within budget). Sometimes, few top students in name-brands soon realize the situation in service industry and look at startups. Now, the startup needs to pay huge salary without knowing when he would quit.

    On a lighter note, Srinivas/Camille/SFGirl/louiecypher,

    Latest I hear from the marriage market is this: “Boy works for Cisco/MSFT/TI/GE/Google/Infy/TCS/Wipro/etc” category beats the crap out of “Boy works in US for XXX earning six figures”. Supply Vs Demand, again. Too much demand for “educated, good looking, working in IT” gals. Gal wants someone who can earn big bucks – in rupees and dollars – when opportunity comes. Oh, she wants to meet her mom twice a week. How can you do that in a startup? Imagine conversations like this:

    Person1: Payyan entha company la velai paakaraar? (Which company is the boy working for?) Person2: Infy/TCS/Wipro/other biggies

    Person1: Oh, nalla company.Foreign poga chance irukku appo….besh besh. Jaathagam irukka? (Nice company.There is chance to go to Foreign. Do you have horoscope?)

    Imagine this

    Person2: Riya/Roundbox Person1: enna athu? kelvi padathaa company yah iruke! sambalam nalla kudupaanga illa? foreign poga mudiyuma? (What? I haven’t heard of that company. Do they give nice salary? Can he go foreign?)

    Truely this is what is happening. I was there!

  39. Vinod i think its just that your company and Riya you mentioned did not know how to play the outsourcing game.It is well known fact, until you have huge scale outsourcing will not work for you, no matter in which country you go. you should be knowing currently its a employees market and not employers another aspect of ECO 101 you did not mention.

    As for the quality of workforce its not even and nor is the work which is being done all of high quality so companies need every kind of person from high end to low end.

  40. A small pool of people will do well but the opportunity for larger change will pass india by.

    Also, to address al beruni’s point, this is a real concern. I think the Indian upper middle class has definitely become disproportionately wealthy thanks to offshoring in the past several years, but my understanding is that there has been a real recent focus on improving manufacturing and competing effectively with countries like China on things like textiles. Gujarat is one of the states where the infrastructure (roads, power, water etc.) is solid enough to support these industries. If this kind of manufacturing sector really takes off, I think India will see a much more broad-based rise in the standard of living.

    Three months ago, Munjal Shah reversed a bit of that shift.

    Munjal!!! The number one man for Khurana sahib stands in the way of Khosla ka Ghosla again.

  41. Any data here? And since you said ‘e.g.’ perhaps some other examples to shore up your point?

    Butter Chicken: are there any other sources of capital beyond VC for R&D intsensive firms that won’t show a profit beyond 5 years? Can one go to Citibank? If not, then I would say that my statement is well supported by an analysis of the portfolio investments made by VCs with India ops. And anecdotally by the calls that I get from my friends at VCs and corporate venture arms who ask people like me to come over to instigate deal flow because nothing is happening organically locally. And the number of patents filed by Indian tech firms (i.e. as opposed to MNC subsidiaries based in India) is miniscule.

    What’s the difference between Butter Chicken and Chicken Tikka BTW ?

  42. on a lighter note, too bad it does not work as well the other way round. I’d like to see an Indian woman who gets a hot man and a hefty dowry by virtue of google/MS/etc 😀

    SFgirl, this is not at all uncommon. Lots of men in india marry women they even consider ugly for a) money b) “foreign chance”

  43. Apologies if I overplayed the “Marriage Attractiveness Index” thing. But I don’t back down from the disproportionate influence of uninformed parents theory.Not until we can send an actual social scientist like Camille out to do a proper study.

  44. on a lighter note, too bad it does not work as well the other way round. I’d like to see an Indian woman who gets a hot man and a hefty dowry by virtue of google/MS/etc 😀
    SFgirl, this is not at all uncommon. Lots of men in india marry women they even consider ugly for a) money b) “foreign chance”

    Yeah but what money is the ugly wife getting from these men? As you state, the men are marrying them for money. And I bet the guys who marry these “ugly” women are not “all that” to begin with. At most they are probably just ordinary looking, I doubt many would be “hot”.

  45. If this kind of manufacturing sector really takes off, I think India will see a much more broad-based rise in the standard of living.

    Rahul – it is taking off, recent numbers put Manufacturing growth at 10%

    On a related note, India is expected to be the largest importer of foodgrains in the world by 2011. Agriculture growth was just 2% in recent numbers. Unfortunately, a big mass of the Indian workforce is still in the agro area. Till this workforce gets absorbed in the manufacturing workforce which will take some time , a lot of people are getting screwed. Inflation is rising rapidly but the incomes for this mass of people is not. The Govt. recently announced big plans for targeting agriculture growth, unfortunately their heart is in the right place but not their approach in attacking the issue.

  46. I followed Munjal’s Blog for some time now and did read that article about their decision to move operations back to the US for cost reasons and found that interesting to say the least…

    My fulltime job is at a company called Sapient and 3,500 of our (5500) staff is in India between Gurgaon and Banglore – we’re actually rated among India’s top employer’s among technolog firms. I think we moved a bulk of our operations over there during the dot com days to stay afloat and we use India for everything from Helpdesk to HR to a ton of project work. Almost everything we do here touches people in India. I am curious how this shift in wage increases are going to affect us in the long run, and our profitability.

    on another note, I have had a lot success outsourcing high-end creative talent to India, mostly Mumbai…and I think thats been an underutilized channel of outsourcing as most desi’s aren’t encouraged to go into artistic professionals…luckily, my parents are on the cooler side of things…

  47. Apologies if I overplayed the “Marriage Attractiveness Index” thing.

    louiecypher, i think you underplayed it if at all. For there are a lot of implications of such an index. what if startups, as perks, also included matchmaking services, or even entire brides. Join Roundbox geta bride free or something like that. Where to get brides — why outsource that as well. All these villages, and somebody was talking about manufacturing a few comments up and female infanticide a few threads up. All problems solved in one stroke. People don’t trust capitalism enough.

  48. Apologies if I overplayed the “Marriage Attractiveness Index” thing. But I don’t back down from the disproportionate influence of uninformed parents theory.Not until we can send an actual social scientist like Camille out to do a proper study.

    She’d love to do it, but her mummy-daddy don’t want her to waste one year roaming around India doing this survey.

    Unfortunately, a big mass of the Indian workforce is still in the agro area. Till this workforce gets absorbed in the manufacturing workforce which will take some time , a lot of people are getting screwed. Inflation is rising rapidly but the incomes for this mass of people is not.

    Great point about agriculture, and yes, I brought up manufacturing, because in its absence, you are going to have wild disparities between purchasing power of the majority of the people, and what goods and services actually cost. I don’t think this new cause for class struggle has explicitly become a dominant aspect of Indian society or politics yet (except indirectly, when the BJP’s India Shining campaign slogan fell flat in rural areas and they lost the elections), but it will become more and more of a factor as these gaps grow.

  49. Butter Chicken and Chicken Tikka BTW ?

    I am presuming you are referring to Chicken Tikka Masala.

    Butter Chicken is a Royal Indian dish. This buttery delicacy is usually to die for. Chicken Tikka Masala is a cheap English imitation/invention with reliance on ketchup and cream. This abomination has now made its way to the US.