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India faces offshore IT skills crisis by 2010

Focus on skills and quality of workforce; physical infrastructure also needs "immediate attention," says report.

A huge IT skills shortage and poor physical infrastructure could threaten India's position as the leading offshore outsourcing location by 2010, according to a new report.

The report by consultant McKinsey and Indian IT body Nasscom warns that labor market pressures could leave India facing a shortfall of 500,000 IT staff equipped with the skills to work in the offshore outsourcing industry.

Jayant Sinha, partner at McKinsey, said that India faces a challenge in maintaining its dominant offshore IT position.

"The skills and quality of the workforce need to be improved, since only 25 percent of technical graduates and 10 to 15 percent of general college graduates are suitable for employment in the offshore IT and BPO industries respectively," he said in the report.

Sinha said the country's urban infrastructure also needs "immediate attention" with better road and air links between India's high-tech hot spots.

"Urban infrastructure needs immediate attention, as offshoring companies' deal with bottlenecks ranging from power to cafeterias. Further growth will have come to from entirely new business districts outside of tier one and tier two cities," he said.

McKinsey predicts global offshore outsourcing spend to hit $110 billion by 2010 and tips India to capture more than 50 percent of the market if it overcomes its challenges.

S. Ramadorai, chairman of Nasscom and CEO of Tata Consultancy Services, said in a statement: "Today the Indian IT and BPO industry is estimated to be $22 billion. The industry is in a strong position to leverage the global software opportunity and establish India as the premier IT destination in the world."

Andy McCue of Silicon.com reported from London.