Software Industry is Abetting Brain Drain

Software industry is the sunrise industry in India. Though it is only about $1 billion, which is much smaller than many traditional industries like steel, manufacturing, chemicals, etc., it has caught the imagination of the nation as the possible industry in which India can eventually dominate the world. It is also one of the few high-tech areas in which India has made its presence felt world wide, and this has helped change the perception of India with respect to technological advancement and has brought national pride. This has led to the desire by the nation and the government to support the industry even more.

The industry has been growing at about 40% per year. As the industry is highly labor intensive, its main raw material is the trained and highly skilled manpower. Nasscom estimates that the software industry will need about 20,000 people per year. Compare this to the total output in all engineering disciplines of the top 50 engineering institutes in the country, which is about 12,000 to 15,000! In this context, the brain-drain from engineering institutes like the IITs, primarily to the US , is a source of concern to the software industry. Besides the brain drain these institutes are also being put in the dock for not producing enough engineers to satisfy the needs of the software industry.

Though brain drain from these institutes and stagnant output of engineering colleges definitely contribute to the manpower shortage of the software industry, the software industry itself has contributed to brain drain and the shortage of manpower in no small measure by its short term approach to business.

It is well known that a good portion of the exports of software industry can be attributed to �body shopping�, in which people are placed on-site overseas for long periods of time and the software company placing them on-site makes a risk-free profit in dollars. This percentage has reduced over the years, and many companies have started doing more projects off-shore in India . Multinationals, who have started operations in India , have also helped in reducing this, as the very purpose of their opening offices here is to get work done in India . Still, a significant portion of exports, particularly of many smaller companies, can be attributed to �body shopping�.

Body shopping inevitably leads to brain drain. When people are placed for a long period of time in the US , it is inevitable that most such people will end up staying in the US, given our almost blinding attraction to the west. And it is well known that many of the people stationed abroad for long periods of time generally do not return. The software industry knows this quite well, but to meet the short-term targets and to make easy money without really doing any work (other than find the person to place overseas), it still continues to engage in this, thereby hurting its own long term interests.

The situation is worsened by small software companies, acting largely as placement agencies for sending software professionals abroad for clients (Bangalore , for example, is full of such companies). This active participation of the software industry in the brain drain from the country, and at the same time crying hoarse about the shortage of trained manpower, almost leads one to think that the industry is really seeking the extra output of engineers (at a cost to the tax payer and the government) only to export them outside and make a profit.

Let us try to estimate the contribution of the software industry to brain drain. Software industry currently employs about 70,000 engineers. The turnover in the industry is at least 20%. That is, 20% of the employees quit their jobs to take up some other job. As a conservative estimate, 40%-50% of these people who quit their jobs, take up jobs overseas, either by leaving the company when posted abroad or through these placement software companies. This means that this year itself about 6000 to 7000 software professionals will leave India with the help of software companies. We can estimate this number in another manner. The quota for India for H-1 visa (the visa that is generally used by software companies when they want to post people in US for a long time) is 20,000. That is, the US consulates in India have put a limit of 20,000 on H-1 visas. It is fair to assume that 30% to 40% (if not higher) of the people given H-1 visa never return. From this, the estimate of the brain drain volume from the software industry comes to 6000-8000 persons this year - similar to the estimate from the turnover percentage. Compare this number to the total brain drain from all the IITs this year, which, if we assume that half of the graduates will go abroad for higher studies, will be only about 1000 persons. In other words, the total brain drain from all the IITs will only be about 15% of the brain drain from the software industry!

Software industry has been growing at about 40% each year. As the output of the software industry is proportional to the engineers it employs, this means that the employment in the software industry in the previous three years was of the level 50,000, 35,000, and 20,000 respectively. Again, considering 10% loss to other countries (though in earlier years this figure is likely to be higher as more body shopping was being done earlier than now), we find that in 4 years (including this year), the software industry has �exported� about 18,000 software engineers � probably comparable to the brain drain from all the IITs in the last two decades!

From the software industry point of view, this brain drain is more serious than the brain drain of fresh graduates from the academic institutions, as in the brain drain from the industry, it is people with experience who are lost. And as is well known in the industry, it is the middle level people that are in most short supply.

What should be done to reduce the brain drain by the software industry? Even though it can be argued that brain drain has also helped India by creating a pool of NRIs who can invest, act as ambassadors, etc., it should be clear that there is a need to reduce the brain drain. The long term solution to the general problem of brain drain is to create an environment (in terms of opportunities, living conditions, wealth creation, etc.), in India that can obviate the need for people to emigrate overseas. However, in the short and medium term some policies and strategies have to be deployed to reduce this. One obvious approach is to reduce the activities that lead to brain drain. That is, minimize the long term stay of software personnel on-site by doing more work off-shore in India . Some companies are already moving in this direction. However, a lot of software companies are not likely to do this, thereby hurting those companies that are willing to take a long term view. Even some of the large software companies are not likely to accept this approach. And organizations like Nasscom are unlikely to support any such move, as many of its member companies do not agree with it.

As the industry itself is not likely to take steps to reduce this brain drain, one strategy to reduce this brain drain is to have proper policies imposed by the country in the larger interests of the nation and the software industry which restrict the brain drain. When the US wanted to put restrictions on H-1 visa, many policy makers and industry watchers believed that this will be in the long term benefit of the software industry in India . However, the software industry lobbied hard against it. Perhaps, the Government of India, in the interest of the country, should lobby with the US to bring in tighter restrictions for long-term visas but more liberal policies for short-term visas so that body shopping is reduced and the bona-fide software service business being conducted from India is encouraged. The software industry itself should take active measures to reduce this brain drain and organizations like Nasscom should regularly collect and publish data on the volume of brain drain from the software industry, just like it publishes the data about total volume of business and exports. And definitely the software organizations and the government should get together to identify and ban those software companies that are only placement agencies, and work out proper disincentives for �exports� that arise by people export. If some such measures are not taken, building a case for increased manpower production will not be perceived as serious, and the manpower shortage of the software industry will get more acute.