A recent Wall Street Journal article proclaimed, "India’s Talent Pool Drying Up." The subtitle said it all–"Tech Sector Suffers as Wages Surge and Multinationals Splurge." Just a few years ago, multinational companies were setting up branches in Bangalore and Pune and signing contracts with Indian software companies like Infosys and Wipro, cashing in on cheap engineers. Now, according to this recent article, all the good talent has been taken. Wages are rising 15% in the tech industry in India, and the consulting firm McKinsey predicts a shortage of 500,000 workers as soon as 2010.

What’s happening? I’m reading the book, "The World is Flat" by Thomas Friedman. This is a great book for understanding the forces that have made the world smaller, hierarchies flatter, and connected once-disparate markets. The author describes some of the forces, "flatteners" that kick-started the outsourcing movement to places like India–Y2K, the dotcom boom and the high tech bust. He chronicles the first multinationals doing business in India–Texas Instruments in 1985 and GE in the early 90’s. It’s taken less than 15 years for the world’s appetite for Indian engineers to outstrip supply. And if you think about momentum really gaining after Y2K, then it’s taken less than 6 years for this situation to emerge.

My conclusion is that the pace of flattening is increasing. Markets move to equilibrium faster and then find a new place where there is a disparity in terms of what things cost and the value delivered to other parts of the world. The WSJ article speculates that the new India will be Russia and the Philippines, where English is widely spoken. I’ll be watching with interest.