Missing Link: India's Software Brain Drain Turns the Tide to Talent Shortage
From India’s own digital rise to new visa dynamics to a huge demand for talent by Big Tech – there are many levers pulling IT professionals back to India.
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If you drive to Hyderabad, once a nondescript city in India only popular for its palaces and biryani, now an IT metropolis, a new beam in the skyline will catch your eye. A massive Google office is rising fast and high. Apparently it’s the biggest one for Google outside its mothership in Mountain View, California. The Google property in Hyderabad will be some 280,000 square metres, with the aim to accommodate a workforce of 18,000 people.
This is just one example of those unprecedented investments in infrastructure and development teams that almost every big technology company is making in India. It’s interesting how the pendulum has swung. Just a few years back, the river was flowing in the opposite direction. The Pied Piper of Software Brain Drain was charming many engineering professionals out of India. The reasons for climbing those early, easy to spot bandwagons were many – ranging from better pay packages and high dollar exchange rates, to better challenges, better growth, better environment, and, yes, easier immigration visas. Today, the reasons have flipped completely.
Why the Grey Matter left
A country strong at school-level STEM education (Science, Technology, Engineering, Mathematics), buzzing with a young demographic (raised by middle-class parents who emphasize engineering and math all their lives), and tagged as the IT powerhouse of the world, has clearly gone through a paradox. Two decades back, its IT brains would choose to head to better jobs and growth pastures like the US and the UK, rather than work in India. More so, as Indian outsourcing giants set up off-site capabilities and dedicated centres abroad. There was more than the dollar-rupee rate's allure to blame here.
Meet Veer Sagar, an Indian IT industry veteran who began his career in the early 80s with leadership stints at ICIM (International Computers Indian Manufacture) and DCM Data Systems. Later, he set up India's first independent provider of medical transcriptions. He has spent over 50 years in the industry now and has been on executive committees of key Indian IT industry associations like MAIT (Manufacturers Association Information Technology) and NASSCOM (National Association of Software and Service Companies). Sagar reflects and tells how, earlier, the exodus accelerated due to H1B visas for the US. "Those who got these visas were practically written off. They seldom came back. For many big IT outsourcing majors, a lot of the revenue in those years came from body-shopping. They were sending people to US for projects done there. In a good volume. But today, many qualified professionals are not getting similar opportunities as before in the US because of a huge shift in the visa situation."
Plus, India has changed, too, says Sagar: "Also, earlier US companies were scared to open an office in India. Now they know how to do it. India is no more the hardship-posting it used to be for expatriates before." The once-dominant desire among Indian IT engineers/techies to work "onshore" is going through a significant shift, avers Krishna Vij from Teamlease Digital, a staffing solutions company. Initially motivated by the appeal of higher salaries and global exposure, this preference has transformed amidst various factors like visa restrictions, the entry of Big Tech in India, and the growing startup sector. Obtaining work visas, especially in the US, has become more complicated, reducing the attractiveness of onshore projects.
"Although onshore salaries still have an advantage, this is diminishing due to rising salaries in India and fluctuating currency rates. Notably, engineers now prioritize factors like career growth, learning opportunities, and work-life balance, which Indian projects increasingly offer", Vij explains. The charm of the US has been dwindling in many ways. The annual Internations Expat Insider survey shows the top foreign countries with Indian expatriates working in tech from 2018 to 2023: Germany (15%) was at the top, followed by the US (4%) and the UK (4%).
In the opinion of D. Tripati Rao, Senior Professor of Economics Chairman, Business Environment Area Indian Institute of Management Lucknow, the exodus has been slowed down, but for the reasons of post-pandemic disruption, global uncertainty due to ongoing war, and disturbance in the Middle East. "Moreover, due to the stress in global IT and services, and banking and financial services, employment offers have seen a sharp reduction or pause."
India Climbs the Value Chain
Almost all foreign companies in the Big IT league have opened offices in India. So have traditional outsourcers like big retail, automotive and banking firms. "Earlier, it was just some back-office work, but now companies are handling major research and development work and big projects in India. You are watching products coming out of India. Indians are, thus, getting more enriching and challenging jobs than ever", Sagar dissects.
Consider big names like Amazon Web Services (AWS). From 2016 to 2022, AWS invested USD 3.7 billion in India and plans to invest USD 12.7 billion in India by 2030 into its local cloud infrastructure – totting up to USD 16.4 billion by 2030 in total investments. Look at SAP. The German software major shared plans in 2023 to double its investments in India over five years.
As per some media reports, Microsoft is also expanding data centres in India. Not just that. NLBServices estimated in a report on Global Capability Centres (GCC, also known as Global Captive Centres) that India can expect at a total of 2,000 GCCs in the country by 2025. GCCs are centres set up by large multinational companies to provide not only business process outsourcing, but also tech services, research & development, engineering, and IT support.
At the same time, a spurt in service demand from key global markets was the reason for about 34 percent of GCCs to boost hiring. The H1 2023's update of the Zinnov-NASSCOM India GCC ecosystem report shows how Mercedes-Benz, Volvo etc. are doing high-end work on their products and platforms in Indian GCCs. More than 1.66 million Indians are employed in GCCs there, a number that is expected to double by 2026.
Work and Life Become More Balanced in India
Furthermore, amidst the challenging global tech market and instances of job reductions, many professionals are recognizing the advantages of working in India, reckons Devroop Dhar, co-founder of the tech advisory group Primus Partners: "The nation stands at the brink of extraordinary growth and is on track to becoming the world's third-largest economy in the near future." Another change factor is the surge of start-ups here. "India boasts the third-largest startup ecosystem globally, paving the way for significant career opportunities." Startups and GCCs have historically offered higher compensation compared to traditional tech companies, Dhar adds.
Government initiatives have also helped to keep, and pull back, workers, especially after breakthroughs like the national Unified Payments Interface, Open Network for Digital Commerce, Open Credit Enablement Network, and Digital Public Goods. According to Pro-Vice-Chancellor Dr. KNS Acharya of the Gandhi Institute of Technology and Management (GITAM), Bengaluru Campus, Indian youth has shown a noticeable inclination towards entrepreneurship and startups in the last five to seven years.
History Doesn’t Repeat, It Rhymes
Albeit, we cannot forget that India has a large set of unemployed but educated people. "Our single-minded focus should be on creating jobs – whether we do it through Make-in-India, or Use-in-India, or Scrap-in-India, doesn’t matter", Sagar suggests. Prof. Rao has pointed out in recent research that despite India's impressive economic growth from 2004-05 to 2017-18, employment generation has lagged the country's growing working-age population. He recalls the problem of "brains lying in the drain" too.
As Vij argues, what India does with these brains coming back home is a crucial question to confront: "Returning experts bring a wealth of global knowledge. Challenges persist, from bridging skill gaps to fostering research and building competitive environments." As seen in Manpower Group's Employment Outlook Survey Q1, 2024, about four out of five employers report difficulty finding the talent they need in 2024. There is a sustained struggle in talent acquisition. And India ranks 7th among nations facing talent shortages, with 81 percent of employers highlighting difficulty finding skilled talent. The IT sector (87%) is among the most affected by talent shortages. A report by Zinnov-NASSCOM predicted that India will face a shortage of 1.4-1.9 million tech professionals by 2026. Sagar also reminds that while the demand for US jobs has seen a downward trend, there is a surge in the demand for education from abroad: "Many Indian students are lining up for foreign degrees these days."
A 2021 report by Redseer Strategy Consultants estimated the number of Indian studying abroad at almost two million by 2024. Madhuram Khatri, a biomedical engineering student, thinks that his recent move to Chicago for his higher education was positive: "Studying abroad has opened my eyes to a plethora of opportunities and methodologies that can significantly enhance healthcare delivery and frontline worker support back in India and around the world."
Khatri sums it up best: "It's about building bridges between nations, cultures, and disciplines to foster a healthier, more connected world." Like Google’s huge new office in Hyderabad, this new stream of brain flow will take its time to strengthen. For now, it looks like the children who went away entranced by the "job" flute are coming back with their own songs – and with the pipers, themselves, following them.
(bme)