The Corporate Crunch

Few days back, I saw a discussion on TV regarding HR management and talent crunch that companies worldwide are facing. And the crisis is truly global, spanning from Ho Chi Minh, to Bulgaria, to Peoria, across Asia, Europe, USA and Latin America. But each company, across sectors, across cultures, across geographies, across demographics identified with one common problem - not enough people who are both able and willing to do the work for the posted pay. Infosys mentor Narayan Murthy’s statement reflects this “Only 2% of the fresh resources that we hire are directly employable”

It was after decades that in 2006 each nation in the world posted a positive GDP growth rate. Money is on the Roll, Markets are happening, Liquidity is on an all time high, Consolidation across sectors is happening......be it Steel, Telecom, Retail, Aviation, Banking....

What's going on here? Globally CAGR has been 5% since 2004. The potential reduction in labor costs via offshoring work to low-wage countries is running out of gas far sooner than many expected. The seemingly inexhaustible pools of cheap labor from China, India, and elsewhere are drying up as demand outstrips the supply of people with the needed skills.

Moreover, the crunch is being aggravated by two factors. China produced everything cheap....so cheap that lack of quality control, violation of human rights and environmental degradation was conveniently neglected. But now, places like India, Vietnam provide almost similar cost benefits with much superior quality, with the added advantages of its democratic setup.

In India, The very clients who cheered the low cost service sector in India are getting victimized by the very growth of this sector. India was never just a nation of English speaking bookworms. The Indian IT-ITES services have scaled into their operations and services, and are moving fast towards better prospects. Value addition in an average Indian is very fast and dynamic. 10 - 15 years from now, Indian homegrown Software firms would be engaged in consulting and high end product development, with expertise in niche areas. Already, low end outsourcing is shifting from India to places like Philippines and South Africa.

Places like Brazil, Argentina, Mexico and Russia are catching up fast. There is heavy investment in the social sectors of these countries, in primary education and healthcare, in housing and agriculture. This will further generate a large pool of young people. To become globally competitive, companies require exact people with exact skills in exact places....and their inability to do so is primarily leading to this global resource crunch.

I guess thats all for now, but I'll be back soon with a post on companies handling its employees.

QOTD:

“Six out of ten is all it takes to produce an enviable record on Wall Street”.
Peter Lynch