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An opportunity for India and the US to come together


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December 01, 2006

An opportunity for India and the US to come together

Steve Hamm

India faces a slew of business challenges, including its infrastructure deficit, salary inflation in the IT sector, and high attrition rates in IT and BPO. But perhaps its biggest HR challenge is developing and deploying the next generation of middle managers. With the top Indian IT companies growing into sprawling global behemoths with 60,000 to 80,000 employees, large numbers of middle managers are needed to keep these huge organizations running efficiently. Right now, most of these managers are grown on the job. But, for the industry to continue to flourish, India will need to graduate far more high-quality MBAs than it does now.

To get a street-level view of the situation for Indian tech companies, I talked to Sarath Sura, managing director for Indian operations of Sierra Atlantic, a software services outfit based in Fremont, Calif., but with most of its 1200 employees in Hyderabad. “It’s a big issue for us. It’s slippery,” he said. In an industry where the annual turnover rate is about 17%, the rate for middle managers is 20% to 25%. The middle management ranks are primarily made up of people from ages 26 to 35. That’s a volatile period for many Indians. They have become established in their jobs and are thinking about getting married—so their focus is on promotions and raises rather than long term career planning and stability. “A lot of people are shifting jobs,” says Sarath. Average wage increases in the Indian IT industry are15% per year, but the best of the middle managers can switch companies and expect to get 50% raises.

They have plenty of leverage to ask for and get higher salaries because they’re in such short supply. All added together, the well-respected Indian School of Management campuses graduate fewer than 1,500 MBAs per year. There are hundreds of private business schools in India, but they tend to be of low quality. India School of Business, a private institution in Hyderbad that was created by top Indian business leaders, has grown rapidly in just five years to produce more than 400 graduates per year. But this is just a drop in the bucket compared to the need. “We need hundreds of top-tier institutions. The government should open the doors and windows and let higher education grow,” says Ajit Rangnekar, deputy dean at ISB. He applauds word from India’s central government earlier this week that it will open the country to foreign academic institutions, but he’s concerned that the government may still put regulatory barriers in their way. “The Indian tech industry is ramping up at 30%, yet the universities have been growing at just 3%. It’s not enough,” says Rangnekar.

I toured the ISB campus and talked to a handful of students and came away impressed. This is a one-year program (no vacations) aimed at people with an average of five years of work experience. The students I talked to were mainly folks with tech backgrounds who wanted to step into operations management, marketing, or M&A. ISB is an unusual place. Most of the students are Indian, and so are most of the faculty members, but many faculty are professors at top-ranked American and European B-schools who teach short stints at ISB. It’s reverse outsourcing, in a sense.

There’s a great opportunity here for the US and India to work together. The US has a great higher education system. India has a fast-growing private sector hungry for young managers. It’s a true win-win—but only if the barriers come down and the American institutions make bold moves into the Indian market.

09:37 PM

India

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I think India still has restrictions on Foreign campuses in India - except for a few - but there are talks for allowing foreign universities to set shop in India.

May be they shall be coming here soon

Posted by: Tirath at December 3, 2006 08:04 AM

Is there a law that says only MBAs can be managers in India? Maybe that is the problem! What about the legions of smart and motivated non MBAs having little hope for real advancement? Would you want a team of only those select few who can afford very high tuition to be your future leaders?

Steve

Posted by: steveexpat at December 5, 2006 05:30 AM

The opportunity sounds very good but is very hard to implement as the American management education cost too much it can run $50000 for one year of education. Most of the Indians can't afford that much and if they can they will land in US and get an American MBA degree. Cost is a big barrier.

Posted by: Kripal at December 5, 2006 01:44 PM

This is a very intersting observation.

Additionally, the middle manager problem in the Indian tech industry is mainly due to the fact that this space is occupied by technies who joined the industry in the early and the mid 1990s without any formal management training !!

With the passage of time, the techies expect to automatically turn into 'Managers' and are not helped by the lack of structured internal management training courses.

The MBAs from the premier institutes such as IIMs and ISB, who join the tech industry as middle manager find themselves in the midst of technies masquerading as middle and senior managers in the organisation.

The long term solution to this problem is not only additional professinal managers but an ability of the organisation to filter the exisiting resources and ensure that only the adequately skilled techies move on to management role in the organisation.

A managerial role should not be a gift for long term employment but a position earned by the employee for his skills and ability to deliver.

Cheers

Posted by: Puneet at December 6, 2006 09:15 AM

The win-win situation for the Indo-US collaboration for higher education may look like a great supply-demand fitment. In fact, I too agree that it actually is so. But not with it's caveats! An Indian workplace is, I believe, starkly different from the workplace that most (if not all) of the foreign MBA programs provide guidance towards. Even if the gates are thrown wide open by the Indian gov, these programs would need to adapt considerably to be of any practical value to Indian managers working in India-based companies. Our PM put this vital point quite clearly at ISB, Hyderabad a few days back. I hope the educationists pay heed.

Cheers

Posted by: Johny at December 10, 2006 12:30 PM


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