India's Scarce Talent, Rising Wages, Balky Clients

In India, of all places, how could outsourcing companies be struggling with a labor shortage? The country has over 1.2 billion people, and the industry has boomed, thanks largely to its abundance of inexpensive and English-speaking workers.

The numbers can be misleading, warns Krishnakumar Natarajan, chief executive of Bangalore-based outsourcing company MindTree. There are 400,000 engineers entering the workforce each year, he says, "but the fact is, only 20 percent of them are industry-ready." And competition for experienced workers is heating up since cutbacks during the financial crisis resulted in fewer newcomers to the industry. "During the recession, nobody recruited," he says. When business revived last year, "suddenly there was a huge shortage of people."