See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/29457704

Human resource issues, challenges and strategies in the Indian software

industry

Article  in  International Journal of Human Resources Development and Management · January 2003

DOI: 10.1504/IJHRDM.2003.003664 · Source: OAI

CITATIONS READS

61 11,343

2 authors, including:

Mohan Thite
Griffith University
91 PUBLICATIONS   1,435 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Global Talent Management via Skilled Migration and Services Offshoring View project

All content following this page was uploaded by Mohan Thite on 11 November 2014.

The user has requested enhancement of the downloaded file.

Int. J. Human Resources Development and Management, Vol. 3, No. 3, 2003 249

Human resource issues, challenges and strategies in

the Indian software industry

Narendra M. Agrawal
Indian Institute of Management Bangalore,
Bannerghatta Road, Bangalore – 560076, India
E-mail: agrawal@iimb.ernet.in

Mohan Thite*
School of Management, Griffith University, Nathan,
QLD 4111, Australia
Fax: +61 7 3875 3887
E-mail: M.Thite@griffith.edu.au
* Corresponding author

Abstract: This paper explores the burgeoning Indian software services industry
by focusing on one of its critical challenges: human resource management.
Using in-depth interviews of various stakeholders from a representative range
of Indian software services organisations, the authors investigate characteristics
of Indian software professionals and some of the key human-resource related
issues and challenges in the industry; namely, voluntary attrition, reluctance to
make a transition from technical to management positions, lack of managerial
skills, difficulties with teamwork, work preferences and maintaining
work-family balance. Finally, organisational strategies to effectively manage
and motivate software professionals, such as moving up the value chain,
creating learning opportunities, bifurcated career path, facilitating wealth
generation and conducive work environment are explored.

Keywords: Indian software industry; Indian software professionals; human

resource management.

Reference to this paper should be made as follows: Agrawal, N.M. and

Thite, M. (2003) ‘Human resource issues, challenges and strategies in the
Indian software industry’, Int. J. Human Resources Development and
Management, Vol. 3, No. 3, pp.249-264.

Biographical notes: N.M. Agrawal is a Professor in OB & HR at the Indian

Institute of Management Bangalore (IIMB), India. He holds a graduate degree
in engineering, a post-graduate degree in personnel management and is a
Fellow of IIMA. He held various positions at Hindustan Aeronautics Ltd. for
24 years. He teaches in the OB & HRM area at IIMB and widely consults with
the industry both in India and abroad in managing software professionals and
learning organisations. He has published and presented more than 40 papers.

Dr. Thite has a Masters Degree in personnel management from Tata Institute of
Social Sciences (TISS), India and a PhD from the Swinburne University of
Technology, Melbourne, Australia. He is an Associate Fellow of the Australian
Human Resource Institute (AHRI) and is currently a faculty member in the
School of Management at Griffith University, Brisbane. Dr. Thite has worked

Copyright © 2003 Inderscience Enterprises Ltd.

250 N.M. Agrawal and M. Thite

extensively as a human resource management professional, particularly in IT

companies in India and Australia. His paper based on his PhD work received an
international research award from the Center for Creative Leadership (CCL),
Greensboro, NC, USA. His current teaching, research and consulting interests
include managing people and strategic positioning of HRM in the knowledge
economy. He has published extensively in international journals and presented
his work at international conferences.

1 Introduction

India, the world’s largest democracy and home to one billion people, is rapidly emerging
as a software powerhouse in the global IT arena and has come to be “regarded by
developing countries the world over as a model for how they can leapfrog stages of
industrial development” [1]. According to the National Association of Software and
Services Companies (NASSCOM), from 1995 to 2000, the Indian software industry
recorded a compounded annual growth rate of around 42% whereas its exports grew at a
staggering 62.3%. The revenues earned by the Indian IT industry have grown from
US$1.73 billion in 1994-95 to US$13.5 billion in 2001-02. The NASSCOM-McKinsey
study estimates that the revenues will reach US$87 billion by 2008, of which software
services exports will account for a lion’s share of US$50 billion or 35% of India’s total
exports.
According to NASSCOM, nearly two-thirds of the revenue of the Indian software
industry is from exports, with a much smaller domestic market. While more than 1250
companies are engaged in software services exports, the top 25 of them accounted for
nearly 60% of revenues in 2000-2001. Their major export markets are the USA (62%)
and Europe (24%). More than 185 of the Fortune 500 companies have outsourced their
software requirements to Indian software houses. Some of the major factors contributing
to the rapid growth of the Indian software services industry include, reportedly the
world’s second largest pool of English-speaking scientific and technical professionals,
low cost of labour, Indian diaspora in the USA, familiarity with western business
systems, and increasing government support in terms of infrastructure development,
simplified procedures and manpower development.
Currently, Indian software exports consist largely of low-end software development
services. However, the leading Indian firms are making strong efforts to move up the
value chain by acquiring better software management capability and deeper knowledge of
business domains, and reducing costs and improving quality by developing superior
methodologies and tools [2]. They are also trying to reduce their dependency on the
US market by expanding their market base to include Europe, Japan and Australasia.
 Human resource issues, challenges and strategies 251

2 State of human resources in Indian software industry

According to Nasscom’s strategic review for 2001:

“The number of Indian IT professionals has grown from an insignificant base
of 6,800 in 1985-86 to 522,000 in March, 2002. 410,000 work in the software
and services sector, of which around 150,000 are in the exports segment. Their
median age is 25 years and nearly 80% of them are men. Thirty seven per cent
of them possess around five years of work experience. Their attrition rate
generally hovers around 15%. The annual average compensation increase in
their base salary in the last five years has been around 20%. Employers seem to
be highly satisfied with the quality of software professionals as they rate them
above 9 on a scale of 1 to 10.” [3]
Since the IT industry is human resource intensive, its performance and global positioning
are heavily dependent on the ability to balance the demand for and supply of IT
professionals. In fact, the first window of opportunity for the Indian software exports
industry was to fill up the acute shortage of IT personnel in the USA. Now, other
countries, such as the UK, Japan, Germany, Singapore and Italy have started their
recruitment drive for Indian software professionals with fast-track visa processing and
other incentives. In the process, the Indian IT industry has been suffering a brain drain as
most of the Indian software professionals who go to USA on H1B permits apply for a
Green Card and opt to settle there permanently.
Many studies point out the shortage of IT personnel in India [1,4]. India reportedly
has 2.5 million scientists and engineers with around 150,000 freshers being added every
year. According to the Nasscom-McKinsey report 1999, India will require a minimum of
2.2 million IT professionals by 2008, excluding the demand for another million by other
countries. With the available pool fast depleting with local and international demand, the
future of the Indian IT industry largely hinges on how it deals with the shortage and how
it trains the professionals in acquiring domain expertise [4]. While there is a strong
technical labour pool, there is a shortage of middle-level systems analysis and project
management skills [1].
Nasscom’s strategic review [3, p.80] points out that the problem is more in terms of
quality than quantity. While so far, the Indian software industry has enjoyed the low
labour cost advantage, estimated at being between 33% to 50% of the corresponding
costs for US counterparts [4,5], the industry can no longer rely on this temporary
advantage as new competitors are fast emerging. Spiralling salary costs that have been
rising at 20% per annum have further eroded the cost advantage. Having realised that the
only sustainable competitive advantage in the long term is the quality and learning
mindset of its employees, the Indian IT industry is moving upwards of the value chain
and fostering the principles of learning organisations.
To further harness India’s advantage in the supply of IT professionals, it is imperative
that there is a concerted effort by the software organisations, universities, corporate and
private training centres and the government agencies to actively collaborate with each
other and contribute towards the development of human capital for sustaining and
strengthening the present growth rate [6].
The software industry is knowledge intensive. Since knowledge, particularly, tacit
knowledge, resides in individuals, they are the bedrock of a software company’s future
and are its most precious assets. However, these assets cannot be controlled within
physical boundaries and confined to commercial contracts of the organisations [7]. They
252 N.M. Agrawal and M. Thite

walk away from the gates of the organisation every day and to make them come back and
share their intellectual capital, organisations must find ways to engage their hearts, minds
and souls in fulfilling organisational goals [8]. Thus, any knowledge-intensive
organisation has to keep human resource management at the core of its strategy to enable
it to recruit and retain the best and the brightest talent. This requires a close examination
of the human resource issues and challenges so that appropriate strategies can be
developed and deployed. Accordingly, this research is aimed at identifying and exploring
key human resource issues and challenges faced by the Indian software services industry
and reviewing successful strategies adopted by some of the key players.

3 Research methodology

Despite the spectacular growth achieved by the industry in the recent past, there is
insufficient literature about this young industry and the challenges it faces. Accordingly,
this study was envisaged as an exploratory study using qualitative research methods that
would provide a richer and fuller understanding of human issues and challenges in the
Indian software industry.
Considering that organisational size influences the nature and type of HR issues and
challenges, the study covered a total of nine organisations, in the first phase, consisting of
two large organisations (2000 employees and more), four medium-size organisations
(between 300 and less than 2000 employees), and three small-size organisations (less
than 300 employees).
The owners of an organisation, being major stakeholders, define the vision and values
of the organisation, which in turn influence the nature and extent of their HR issues,
challenges and strategies. Accordingly, based on ownership patterns, three Indian
initiated and substantially Indian owned software organisations, three non-resident or
overseas Indian owned software organisations, and three Indian subsidiaries of
multinational corporations were covered by the study in the first phase.
Qualitative data was collected in two phases. In the first phase, nineteen in-depth
interviews were conducted with four senior information services (IS) managers, seven
HR managers and eight software professionals with the objective of identifying common
characteristics of Indian software professionals and the major HR issues and challenges,
as perceived by different levels of management within the Indian software services
industry. However, in some organisations, we could not interview representatives from
each category due to non-availability of the participants. For each respondent category, a
semi-structured interview schedule was developed and used as a general guide, so as not
to interrupt the natural flow of the interview process. All the interviews were transcripted
and the content analysed.
Based on the information collected in the first phase, a discussion paper was prepared
identifying major HR issues, challenges and strategies, as perceived by the respondents.
In the second phase, the discussion paper was circulated amongst software professionals
who had enrolled in the year 2000 batch of the Post Graduate Diploma in Software
Enterprise Management (PGSM) conducted by the Indian Institute of Management,
Bangalore (IIMB). PGSM is a popular part-time, three-year course with flexible modules
to suit a working software professional. Applicants for the program must have a graduate
degree with minimum two years of work. The objective of the second phase of the data
collection process was to seek further input from Indian software professionals on the HR
 Human resource issues, challenges and strategies 253

issues and challenges identified in the first phase and to critically comment on the extent
and nature of the issues raised, with possible solutions. Of the 60 PGSM students to
whom the discussion paper was circulated, 25 valid responses were received by e-mail.
In summary, the empirical data consisted of interviews in the first phase with 19
respondents covering senior IS managers, HR managers and software professionals, and
further validated and refined by 25 software professionals who responded to the
discussion paper in the second phase. Considering the generic and exploratory nature
(HRM) and scope (Indian IT industry) of the study, data is presented and analysed in
broad terms and authors have relied upon their considerable experience in the subject
matter in drawing up conclusions. Both of the authors have worked closely with the
major IT companies in India in various roles as HR manager, consultant and trainer. This
paper is reflective of their collective experience in the industry and supplemented from
notes kept by them on their interaction with key players in the industry over the years, in
connection with their consultancy and academic work. Where appropriate, secondary
data, such as other published studies and news reports on current best practices in the
industry have been used.

4 Characteristics of Indian software professionals

Our study revealed that Indian software professionals exhibit the following occupational
characteristics:
• Having invested heavily in gaining relevant knowledge over time, the knowledge
acquired by them becomes their self-concept.
• They seek new knowledge on a continuous basis to experience a sense of growth in
their careers. Hence, they seek to work on new technologies, new platforms and with
new organisations to enrich their learning and career prospects. They place their
professional growth higher than organisational loyalty.
• They tend to be highly analytical and expect a clear rationale in everything they do
or the organisation does.
• They tend to be high achievers and expect periodical and tangible feedback and
rewards. They value performance-based rewards. Equity is an important
consideration for them in reward management.
• They value autonomy, professionalism and innovativeness.
Software professionals typically exhibit characteristics attributed to scientific and
professional employees in that they perform work that is intellectual in nature and
requires advance education; they need to be self-disciplined and achievement-oriented;
they prefer considerable autonomy and that they tend to be cosmopolitan rather than
local [9]. According to Peterson [10], as an occupational group, IT personnel exhibit
certain distinguishing traits, namely, youth, mobility, short tenure, intenseness,
adaptability to change, craftsman approach to work with a unique mix of product/service
orientation, sensitivity to work (as they see their output as an extension of their
personality) isolation and aloofness in relating to and dealing with overall organisational
environments, and association with absolutes with a black and white approach to problem
254 N.M. Agrawal and M. Thite

solving. As knowledge workers, they are more loyal to their profession than the
organisation they work for. Considering the global nature of the IT industry and
technology, Indians are no different from others as far as common occupational traits are
concerned. However, they also show some unique characteristics, particularly in the light
of the high cultural context of Indian society.
Our study found that ‘managing multiple expectations’ is one such culture-based
characteristic of Indian software professionals. Apart from ‘organisational expectations’
of working on any project or technology as required by customers and ‘self expectations’
of technical excellence and tangible and immediate rewards, Indian software
professionals need to manage ‘expectations of peers and family members’. Peers discuss,
often in exaggerated terms, how they are working on the latest technology and receive
substantial wage increases, particularly overseas offers. Parents and family members of
software professionals are influenced by the media hype of the prospects of the Indian
software industry and exert pressure on them to go for positions that offer big money,
overseas trips etc. Settling abroad is considered a status symbol in Indian society. These
multiple pulls and pressures create immense confusion in the minds of Indian software
professionals and tempt them to go for short-term gains, often at the cost of the technical
excellence to be gained by staying on in one position or organisation for a sufficiently
long period.
Multiple expectations create several HRM-related problems. When being interviewed
for a position, software professionals state that learning is their most important objective.
However, when being allocated for different projects and locations, they lobby for
positions that are seen as ‘high potential’ by their peers, family members etc. Due to
exaggerated expectations, many of them get disillusioned with salary increases and
promotions and express their frustration by resigning from their jobs. As mentioned by a
senior manager:
“Even though software professionals are no superior in their intellectual calibre
to other occupational groups, booming global demand has made them arrogant
and they expect to be treated like demi-Gods.”
However, anecdotal evidence from HR managers suggests that the crash of dot-coms and
the current recession seem to have brought down these expectations to realistic levels. It
needs to be noted that Indian society is new to boom and bust economic cycles and it will
take some time for Indian software professionals to manage their employment
expectations in a cyclical economy and make psychological adjustments to issues and
problems associated with cyclical unemployment or under-employment.

5 HR issues and challenges in Indian software services industry

5.1 Voluntary attrition

Global demand for Indian software professionals has resulted in a heavy turnover and
spiralling salary costs for the Indian software services industry. As a result, there are as
many of them abroad as there are in India [1]. The majority of Indian software
professionals aspire and tend to migrate overseas permanently once they acquire about
three years’ experience making it difficult for software organisations to staff and
particularly, lead projects [4]. The shortage has created a vacuum in project management
 Human resource issues, challenges and strategies 255

skills and many US clients consider this ‘missing middle layer’ as a barrier to the growth
of the Indian software services industry [1,11]. While there is no dearth of fresh
engineering graduates aspiring to enter the software industry, employers have to spend
considerable time, money and effort to train them to suit their needs only to lose them a
few years later.
In a recent survey, the Indian software firms indicated, irrespective of their age, size
and market focus, that manpower shortage and employee attrition are the most serious
problems affecting them [11]. However, this problem has to be viewed in the context of
the phenomenal growth of the industry in the past decade. Further, Fernandes et al. [4]
question the bias of the Indian software industry towards engineering graduates,
considering that the bulk of the work is relatively non-technical and requires mostly
logical and methodical work and a familiarity with software development tools and
languages.
Recent recessionary trends have slowed down voluntary attrition rates. Several
software organisations have moved beyond ‘body-shopping’ (that is, sending people
abroad for on-site services) and moving up the value chain, thus, providing opportunities
to their employees to work on cutting edge technologies. They have also created a
world-class infrastructure offering a best-practice working atmosphere. These strategies
are discussed later in the paper.

5.2 Give me the title not the job: reluctance for managerial positions
Most software professionals work in project teams and the quality of leadership of these
teams is one of the crucial factors in determining the success of the team. In information
systems (IS) departments, project managers are faced with increasingly complex tasks
that require more than a single set of management skills [12]. That is why the concept of
‘hybrid managers’, combining business, technical and managerial skills, is gaining
prominence [13]. According to Cleland [14], a project’s success or failure is the result of
the leadership of the projects’ stakeholders. Geaney [15] agrees:
“In today’s corporations, tremendous responsibility lies with the IS project
manager who must take the corporation’s vision and translate that vision in to
systems that support the company’s strategic direction.”
However, Indian software services organisations suffer severely from the lack of quantity
and quality of project managers. Our study revealed that the reasons are many-fold. One
reason is that since a considerable number of Indian software professionals go overseas
after acquiring three years or more experience, there is a dearth of experienced
professionals who can take up managerial positions. The second reason is that software
professionals dislike giving up their technical career for management positions.
Following are some of the reasons cited by them in the study:

• Reluctance to deal with ‘people issues’ that are far more complex and abstract
compared to technical issues that suit their black and white approach to problem
solving.
• Project management and administration typically take up 25% to 40% of a project
manager’s time and is considered to be a waste of time by software professionals as
it conflicts with their quest for achieving technical excellence.
256 N.M. Agrawal and M. Thite

• Software professionals perceive that their standing in the professional community

(in the eyes of their peers, subordinates and superiors), and their career prospects (in
the eyes of their current and prospective employers), are primarily defined by their
technical and not managerial excellence. Since their work becomes their
self-concept, their desire is to acquire latest technical skills by working on
cutting-edge technologies and platforms. Thus, their personal career goals are in
conflict with organisational goals, which need project managers as much as technical
analysts and programmers.
• Due to a dearth of project managers, Indian organisations tend to promote software
professionals at a very early stage of their careers when they are still finding their
technical depth. Thus, a professional with around two years experience is frequently
expected to take on the role of a project leader [4]. Many software professionals feel
that because they are pushed in to leadership positions without adequate training and
role models to follow, they have to learn the ropes the hard way, on the job, and most
often, by burning their fingers.
However, the HR managers reported that despite their dislike for project management
positions, Indian software professionals aspire for the title. As in other Asian societies,
titles and perks act as status symbols in India.

5.3 Difficulties with team work

Since software professionals mostly work in teams, ability to work effectively in a team
environment becomes crucial. However, our study revealed a number of team-related
issues and challenges in the Indian software services industry that inhibit effective
functioning of teams:
• Many software professionals stated that they prefer to work by themselves so that
they have complete control over how they engage in problem solving and trouble
shooting without wasting time in team meetings, resolving differences, arriving at a
consensus, compromising their stand for the sake of team cohesion and letting
somebody piggy-back on their achievements.
• The project teams work for a limited duration and in many cases their life span is as
short as three months. This makes it very difficult for team members to develop a
social bond and link their personal goals of learning and rewards to those of the team
members.
• While junior members look forward to interacting with senior team members to
learn, the latter consider mentoring an unnecessary drag on their busy schedule and a
thankless job. Many project managers and module leaders prefer to engage in trouble
shooting themselves to save time. Their preference to “micro-manage”, as one senior
manager described, results in the blocking of knowledge transfer. The temporary
nature of teams makes the managers even more reluctant to invest time and effort in
teaching junior members because when members leave, the fruits of their hard
mentoring work will go to other teams.
 Human resource issues, challenges and strategies 257

• Knowledge is power and many software professionals would like to hoard their
expertise to create a niche for themselves in the organisation in general and in their
teams, in particular. This is also because many project team members are generally
of similar age and experience and this is their way of defining their status and
position in the group. Another reason for their reluctance to share their knowledge is
that fast changing technology is creating insecurity for software professionals and
one way to manage insecurity is by creating and hoarding knowledge that is unique
and exclusive.
Our study found that lack of effective teamwork in Indian software services organisations
has its roots in the HR philosophy and processes, particularly in selection, training and
remuneration management. At the time of recruitment and selection of software
professionals, organisations tend to test and value technical skills much more than soft
skills. Considering the rate of technological obsolescence in the industry, it is important
that the selection process needs to emphasise learning orientation than specific technical
knowledge. While the HR managers interviewed by us admitted that soft skills are
equally important, they said that software managers on the interview panel tend to prefer
applicants with appropriate technical skills so that they could be deployed in projects and
start contributing straight away. Also, booming business and an inadequate supply of
software professionals meant that HR managers had to hasten the selection process, often
at the cost of selecting people without the right behavioural competencies.
The HR managers also revealed that whenever they arranged training programs on
soft-skills, such as inter-personal skills, project leadership, communication skills,
interviewing, performance management and counselling, the senior software managers
and project managers were reluctant to release their team members to undertake the
training and software professionals themselves disliked attending these courses.
Another possible reason for the lack of enthusiasm for teamwork amongst Indian
software professionals is that while most of the work is done in teams, performance
assessment and reward management still centre around individual contribution and that as
judged by the immediate superior. Many Indian software organisations have now
introduced 360-degree performance assessment but they are predominantly for
self-development and not for determining rewards. Many software professionals covered
in our study expressed their reservations about 360-degree performance feedback as in
their view ‘a lot of maturity is required on the part of the appraiser as well as the
appraisee to provide and receive feedback in the right spirit.’ Further, team rewards are
few and far between. Despite the problems associated with teamwork, many software
professionals in our study clearly recognised the need for team structure in software
organisations, particularly in developing knowledge together and sharing the same with
team members.

5.4 Work preferences

Even though many Indian software services organisations are slowly but steadily moving
up the value chain, a considerable number of them still derive a substantial portion of
their revenue by servicing proprietary language and legacy systems and outdated
technologies. This programming experience may be of little value in the outside IT
market and software professionals feel nervous about its implications for their career
growth and prospects. Obviously, software professionals who are keen to learn new
258 N.M. Agrawal and M. Thite

technologies on new platforms for new-economy applications are extremely reluctant to

work on projects using old technology.
Currently, Indian software organisations derive most of their income from North
America. In recent times, due to recession and competition, these organisations have
increasingly sought new business opportunities in Europe, Japan and Australia. However,
software professionals prefer to work in the USA as it is perceived to be their ultimate
destination and is considered to be the industry leader in terms of remuneration and
opportunities to work on emerging technologies. Further, they are relatively more
familiar with the language and culture in the USA compared to countries such as
Germany and Japan.
Due to these perceived biases, Indian software services organisations find it difficult
to bridge the gap between organisational requirements and individual preferences.

5.5 Maintaining work-family balance

Software development is mentally challenging. When they are engrossed in work,
software professionals lose track of time and would prefer to continue working rather
than interrupting their mental process. They thrive and look forward to intellectually
challenging problems. Coupled with this occupational characteristic, they also need to
meet tight deadlines, often unrealistically agreed to by marketing managers to win a
contract. It is common for Indian software professionals to spend 12 to 14 hours a day
working on projects. Combined with inefficient transport and other infrastructure, they
tend to spend very little time with the family. Over time, they tend to merge their
personal identity with their role identity. The vacuum created by lack of non-work life
activities apart from work leads to emptiness within and annoyance with the organisation.
Many software professionals covered by the study observed that spending long hours
at work is the result of a combination of organisational reasons, such as unrealistic
project time estimation and poor project planning, as well as personal reasons, such as
poor time management skills, unproductive web surfing, internet chatting, playing
computer games, personal e-mail exchanges and the preference of young professionals
who choose to socialise more with peers by being at the office longer than required.
Some respondents also pointed out that while most organisations in principle discourage
over work, star performers who typically over work get handsome rewards.
Even though no specific studies have been conducted, anecdotal evidence suggests
that burnout, stress and other health hazards are increasingly becoming important
employment issues affecting the industry.

5.6 Influence of organisational size and ownership

In addition to common issues and challenges discussed earlier, a few interesting
differences, such as those described below, emerged relating to size and ownership of the
organisations:
Small software organisations seem to have higher attrition rates compared to medium
or large organisations. Many of them are owned by non-resident Indians and they have
been operating in the lower segments of the value chain. Medium and large organisations,
due to their size and resource availability, operate in all the segments of value chain.
Hence, they can offer job rotation and job enrichment opportunities to software
professionals with different interests and competencies. Small organisations, on the other
 Human resource issues, challenges and strategies 259

hand, have limited growth opportunities. However, many software professionals prefer to
work in small organisations, which offer roles with greater depth and breadth as well as
more responsibility, authority and autonomy. This trend was more prominent at the
height of the dot-com boom when many professionals left well-established companies to
nurture their entrepreneurial ambitions.
Large organisations seem to acquire bureaucratic systems, processes and a
bureaucratic mentality in the process of their growth. In our study, many software
professionals observed that as a consequence, the ability of such organisations to attract
and retain excellent and innovative software professionals becomes limited.
In the subsidiaries of multinational software corporations, software professionals had
the perception that the projects on which they were working were inferior compared to
projects being undertaken by their parent organisation. This is likely to affect their
motivation levels. Further, many of them cater exclusively to the in-house IT
requirements of the company and work on proprietary languages that have a limited
application outside these organisations. This adversely affects the career prospects of
software professionals.

6 Strategies to deal with HR issues and challenges

Apart from identifying the above HR-related issues and challenges, our study looked at
possible strategies for effectively dealing with them. While these strategies differ from
one organisation to another and are influenced by their size, growth, culture, ownership
pattern etc., we could note commonalities in the observations made by the respondents
about successful HR practices in their own organisations and others. We have also relied
on secondary data, such as newspaper reports, and our consulting experience in
identifying these strategies.

6.1 Moving up the value chain

Many Indian software organisations are moving up the value chain from body shopping
to business solution providers, and product and technology developers. The QAI-QSM IT
Benchmarking Consortium Report for 1999-2000 [16] suggested that the performance of
the Indian software industry is gradually improving with time, which correlates well the
increasing process of maturity. This mode of moving up the value chain requires
organisations to develop capabilities and competencies to understand the business
strategies of client organisations, to define business solutions and then provide software
support in terms of design and development of technical architecture and programming
codes. Accordingly, many Indian software organisations have been recruiting business
management graduates who work with clients to understand their business strategies and
design business solutions. Software professionals support these projects by designing
technical architecture and programming. Skills and competencies required to work on
different segments of the value chain are different. Professionals working on higher
segments of the value chain are expected to have superior levels of software knowledge
and domain knowledge, and are naturally, paid more.
Many respondents in the study pointed out that moving up the value chain is a slow
and arduous process and needs to be backed by the government by the setting up
260 N.M. Agrawal and M. Thite

a world-class infrastructure, educational institutions and investor friendly economic

policies. At the same time, it needs to be recognised that despite the desire to move up the
value chain, most Indian software organisations will continue to work and expand
operations at the lower end of value chain, such as off-shoring, as the market is still huge
and expanding. Even the fastest growing IT-enabled services (ITES) are low in the value
chain but offer tremendous business opportunities. This would necessitate different career
planning for different levels of software professionals. For example, general graduates
with no exposure to IT may be recruited and groomed for low-end operations whereas
high potential IT graduates may be placed in high-end positions.

6.2 Bifurcated career paths

In line with global IT companies, many Indian software organisations have created a
bifurcated career path for technical and managerial streams to ensure that software
professionals are not pushed against their will in to general management positions whilst
at the same time, recruiting high quality business graduates who have both information
systems and business knowledge. The reaction of software professionals to this move is
mixed. While on the one hand, they welcome the creation of a bifurcated career path as it
allows them to concentrate on technical excellence; on the other hand, they feel left out
of influential positions within the company. Software organisations aspiring to use this
path for growing up on the value chain would need to develop organisational systems and
processes to ensure that business specialists and software professionals feel comfortable
working as a part of the same team.
Indian software organisations are now designing well thought out strategies and
operational models to facilitate internal job rotations that offer lateral, cross locational,
and competency centred opportunities as a retention strategy aimed towards top
performers [17]. Internal job postings on the company intranets have become
increasingly popular. While this step would better integrate individual career goals with
organisational needs, it remains to be seen how project managers and business unit heads
would respond to the desires of their team members to move to other units within the
company, often at the cost of disturbing current projects. This scepticism arises from the
fact that in the profit centre business unit model, often the units focus on their self
interests rather than the overall organisational or employee interests.
The importance of career planning and its implications for HRM in Indian software
companies was neatly summed up by a software professional:
“The multiple expectations, ineffective performance appraisal, aversion to take
up managerial tasks, burnout can all be traced back to lack of career planning.
As a result, the individual does not know where he is, what he will be and more
importantly, what he wants to be.”
Many software professionals admitted that they do get misled on career opportunities and
keep seeking the elusive greener pastures. They seem to be in need of mentoring by
senior managers who can relate their experiences to help others to pitch their career
expectations at realistic levels.
 Human resource issues, challenges and strategies 261

6.3 Creating learning opportunities

Moving up the value chain is a powerful way of creating learning opportunities. In
addition, Indian software organisations are investing substantial amounts of time and
resources to help their organisational members to learn what they value and what is
relevant for the organisations. Some of these learning-oriented initiatives are described
below:
Many software organisations spend about 5% of their HR budget on training. In the
recent Business Today, Hewitt’s study of the 25 best employers in India for 2001, ten of
them were from the IT industry and between them, they offered an average of 48 hours of
training/year to their employees [18].
The workplaces of many organisations resemble a campus-like learning atmosphere
in huge self-contained townships with environment friendly facilities, informal meetings
on the lawn or in the cafeteria, well equipped library buildings, information-rich
intranets, regular work and hobby related workshops and activities, town hall meetings
with top management etc. In these organisations, the work environment is informal, the
work ethic is meritocracy based and remuneration is performance based at the individual,
team and organisational level.
Many Indian software organisations are reputed for the depth and breadth of their
induction programs. This is partly because they recruit many students with a
non-software background from technical institutions and are required to give them a
proper grounding in software technology before they are deployed on projects.
Leadership and interpersonal skills training is being given increasingly more importance.
Senior managers and project managers are being encouraged to spend some time on a
regular basis as a trainer and mentor. The CEOs of many companies walk the talk by
participating in every leadership programme sharing organisational vision and values. As
a testimony to the increasing people focus and quality of people management in the
Indian software industry, Wipro Technologies became the first IT services company in
the world to attain People Capability Maturity Model (PCMM) Level 5 in 2001.

6.4 Facilitating wealth generation

Many Indian software organisations have realised that one of the keys to retaining
software professionals is to enable them to generate wealth for themselves. This fits in
with the expectation of software professionals for tangible rewards and entrepreneurial
ambitions. Increasingly, Indian as well as multinational corporations operating in India
use employee stock option schemes (ESOPs) to share wealth with their employees.
Indian organisations also use notional shares, having a lock-in period of two years. The
difference in value of shares at the end of the locking period is paid to employees. Many
Indian organisations are providing encouragement, support and venture capital to their
employees to become entrepreneurs.

6.5 Developing a conducive work environment

Considering that software professionals work long hours doing intense work to meet tight
deadlines, it is imperative that the work place has to be conducive for learning and at the
same time be informal, full of fun, excitement and passion. Many Indian software
262 N.M. Agrawal and M. Thite

organisations have spent considerable time, efforts and money to design a suitable work
place where employees can learn, experiment and relieve their stress. Apart from the
commonly found informal dress code, open and friendly office spaces, and unhindered
access to higher management, they offer sports facilities, cafeteria, and concierge
facilities, which are highly valued in a country with a poor infrastructure. A number of
fun activities such as debate, fancy dress, social outings and quiz competitions are
organised for organisation members and their families.
Surprisingly, not many organisations seem to have paid enough attention to
occupational health issues, such as burnout, constant exposure to computer screens and
stress, which have been recognised by most respondents as a critical challenge.

7 Concluding observations

Indian software services organisations have come a long way in just few years and are
poised to continue their spectacular growth in the near future. They operate in a
knowledge-intense industry where knowledge workers hold the key to their future and
therefore, successful HRM philosophy and systems are critical success factors for their
survival and growth. In their short history, they have had to learn the ropes fairly quickly
and break away from the traditional Indian management philosophy and systems rooted
in an inefficient, unproductive and bureaucratised environment, to become part
of a globalised, technology-intensive and highly competitive industry. They have faced
daunting human resource related challenges in the process, from recruitment
to retainment, compensation to career planning and technological obsolescence to
turnover [19].
Considering that the Indian software industry is relatively new and that very little
research has been done on managing knowledge workers in the industry, the key HR
issues and challenges discussed here are exploratory in their scope and nature. They have
important implications not only for Indian-owned software organisations but also for
IT-related MNCs operating in India and other organisations around the world, which are
increasingly outsourcing their IT activities to India. However, future research on the topic
needs to be more broad-based and longitudinal to unearth the key variables and
incorporate differences in organisational size, ownership pattern, organisational culture,
length of work experience of software professionals etc. to make a more meaningful
contribution. Many key strategies discussed here are more suitable for large
organisations. Future studies should incorporate best practices applicable to different
sectors of the industry, including companies that cater to domestic industry as well as IT
departments of non-IT companies.
Much of the data for the present study was collected at a time when the industry was
operating in business boom and dot-com hype. Reflecting the fast changing nature of the
industry, the present environment reflects a vastly changed landscape with recessionary
conditions and the near collapse of dot-com business. This has brought down software
professionals from their demi-God status and sobered the exaggerated expectations of
their career prospects. As a result, voluntary attrition has been considerably reduced and
employees are reassessing their career priorities more realistically. The changed business
scenario has created new problems, such as downsizing, which was unheard of in the
Indian software services industry.
 Human resource issues, challenges and strategies 263

Some organisations have used the adverse business situation as an opportunity to

reassess their HR philosophy and systems, which earlier were short-term focused, and
recruitment driven. This is a step in the right direction as many software professionals in
our study expressed their dissatisfaction about the HR department for focusing more on
maintenance than on development. Some organisations are utilising the slack time to
broaden the skills and competencies of their employees to enable them to move up the
value chain. Organisations, such as, as Sasken Communication Technologies, have
portrayed a humane face amidst recessionary conditions by resorting to across the board
salary cuts instead of downsizing, whereas, others have started weeding out the bottom
5% to10% of poor performers who were earlier tolerated in the boom period.
The time is ripe for Indian software services organisations to stop resting on their
laurels and to adopt a long-term focus and strategy to their HR systems and procedures
for recruitment, performance management, remuneration, training and career
management so that they can further exploit global business opportunities and evolve
themselves as truly world-class organisations. Many respondents in the study have
warned that the Indian software industry has been a big success story so far, but in the
light of increasing competition from countries, such as Ireland, Israel, China, and the
Philippines, its continued prosperity and positioning in the global IT industry lies,
amongst other things, in developing and harnessing the human talent at a global level,
which includes recruitment and retainment of software professionals from different parts
of the world and effectively managing cross-cultural and international HRM issues.
The business environment also calls for collaboration with competitors. For example,
during his recent visit to India, Chinese Premier Zhu Rongji called for a fusion of India’s
software expertise and China’s supremacy in hardware to emerge as the number one
player in the realm of technology-driven economic growth, but the reaction of the Indian
IT industry to his call was mixed [20]. Indian IT companies have to actively consider
such collaborations and HR people can play a critical role in the process by ensuring
compatibility in culture and competencies.
Our study indicates that one of key reasons for the success of many Indian software
organisations is their commitment and passion to become learning organisations where
employees learn to learn by shedding organisational defensive routines, questioning
existing practices and assumptions and letting creative and innovative ideas flow freely
without any hindrance. For example, Infosys Technologies believes in “making the
innovation obsolete before the competition, encouraging essential attributes such as
speed, imagination and excellence, surrounding oneself with smarter people and cheering
any idea without cynicism.” These organisations identify and institutionalise new
competencies [21] required in today’s knowledge workers, such as creativity, innovation,
ability to deal with uncertainty and ambiguity.
Considering that the software industry is extremely knowledge-intensive, where the
culture or the mindset of knowledge workers is the only sustainable competitive
advantage, learning orientation, conducive HR philosophy and systems become key
levers in knowledge management [7]. A mindset that is attuned to ambiguity, to
appreciating diversity and thinking laterally, to an internalised ability to deal with
multi-cultural contexts is an essential prerequisite in the emerging technological world of
tomorrow [22]. The Indian software industry needs to strengthen and deepen this
commitment further to create a niche for itself in a highly competitive and global
business environment.
 264 N.M. Agrawal and M. Thite

Acknowledgements

The authors are grateful to the Ministry of HRD. Government of India and the Centre for
Software Management, Indian Institute of Management, Bangalore, India for providing
financial grants for the study.

References
1 Tschang, T. (2001) ‘The basic characteristics of skills and organisational capabilities in the
Indian software industry’, Working Paper Series No. 13, Asian Development Bank (ADB)
Institute, Tokyo.
2 Arora, A., Arunachalam, V.S., Asundi, J. and Fernandes, R. (2001) ‘The Indian software
services industry’, Research Policy, Vol. 30, No. 8, pp.1267–1287.
3 National Association of Software and Services Companies (2001) The Indian Software
Industry in India: A Strategic Review, New Delhi, India.
4 Fernandes, R., Arora, A. and Asundi, J. (2000) ‘Supply and demand for software developers in
India’, Heinz School Working Paper, Carnegie Mellon University. Pittsburgh.
5 INFAC (1998) ‘Indian software market status’, Report, January, Mumbai.
6 Agrawal, N.M. and Rao, M.R. (2002) ‘Developing human capital for sustaining the growth of
Indian software industry’, Working Paper, Indian Institute of Management, Bangalore, India.
7 Thite, M. (2003) Strategic Positioning of HRM in the Knowledge Economy.4th European
Conference on Organisational Knowledge, Learning & Capabilities (OKLC), 13-14 April,
2003. IESE Business School: Barcelona, Spain.
8 Kanter, R.M. (1997) ‘Restring people to the heart of the organisation of the future’, in
F. Hasselbein et al. (Eds.) The Organisation of the Future, SF, Jossey Bass.
9 Davis, K. (1981) Human Behaviour at Work, McGraw Hill, New York.
10 Peterson, R.O. (1987) Managing the Systems Development Function, Van Nostrand Reinhold
Company, New York.
11 Arora, A., Arunachalam, V.S., Asundi, J. and Fernandes, R. (2000) ‘The Indian software
industry’, Heinz School Working Paper, Carnegie Mellon University, Pittsburgh.
12 Carter, N. (1988) ‘The project manager: an emerging professional’, Journal of Information
Systems Management, Vol. 5, No. 4, pp.8–14.
13 Palmer, C.and Ottley, S. (1990) ‘From potential to reality’, a Report by the British Computer
Society Task Group on Hybrids, January.
14 Cleland, D.I. (1995) ‘Leadership and the project management body of knowledge’,
International Journal of Project Management,Vol. 13, No. 2, pp.83–88.
15 Geany, M.M. (1995) ‘The right skills for the job’, Computing Canada, Vol. 21, No. 24.
16 QAI-QSM IT Benchmarking Consortium Report 1999-2000. Available from:
http://www.qaiindia.com/Benchmrking/benchmarking.htm
17 Financial Express (2002) ‘Internal job rotation: the new IT retention mantra’, 7 March.
18 Business Today (2002) ‘The 25 best employers in India’, 3 March.
19 Thite, M. (1994) ‘Human resource management’, Dataquest (India), 16-31 December.
20 Financial Express (2002) ‘Rongji’s call draws mixed reaction from software honchos’
23 January.
21 Agrawal, N.M. (1999) ‘Managing knowledge workers: benchmarking Indian IT
organisations’, Management Review, June, Vol. 13, No. 4, pp.81–92.
22 Karnik, K. (2002) Indian Software and Services Industry: Sustaining Growth,
Available from: http://www.nasscom.org/articles/karniks.asp

View publication stats