I had lunch recently with Peter Bendor-Samuel who is usually based in Texas, but was over in London for work. Peter is well known as the founder of the Everest Group, a long established US consulting and research group that’s starting to be a lot more active in Europe these days.

Peter is extremely tall and very knowledgeable. He has a sort of rapid-fire delivery of information that demonstrates quite a formidable mind – he obviously thinks about his subject, a lot. It also makes quite a refreshing change from some of the analysts in the market. It’s clear when you talk to Peter that he has lived through some outsourcing triumphs and disasters – he talks with real examples and cases, not from the 10,000m up big picture of the corporate world preferred by some. I like his approach, but you need to be sharp to stay on top of what he is talking about.

One example of his no-nonsense approach is the debate over which country or region is the most attractive for offshoring. Everest has tossed all the conventional wisdom out of the window and started focusing on city-by-city comparisons. They have researched about a hundred cities now, examining key variables such as population demographics, local universities, and traditional industries, to map out how attractive investment in that particular city really is. It’s a logical approach. We all know that Bath isn’t much like Glasgow – why would we judge Chennai in the same way as we do Delhi?

I thought I would take the advantage of our lunch to ask him about one of the classic issues everyone is talking about at present, labour arbitrage and the skills shortage predicted for India. At the recent Nasscom conference in India I listened to speaker after speaker worrying about how the industry will not be able to continue growing at the present stratospheric rates when the source of skilled young graduates starts drying up.

Peter said to me: “The fundamental problem with labour arbitrage and the inflation factors in India and Eastern Europe – but especially India – is not the size of the underlying population. The population is plenty big and there are plenty of educated people. The problem is the rate of growth. The ability of the economy to mint new graduates and the get them into the equation is a function of the rate of growth, not of the fundamental economy.”

He then gave one of his typical examples that sheds a bit of light on how attractive it really is to train to be a computer programmer in India: “There’s more than a billion people in India. To give you some perspective, a programmer in the UK gets paid about 1.7 times average pay, so it’s a relatively attractive thing to be a programmer in the UK. In India a programmer gets 14.8 times the average, so it’s really attractive to be a programmer in India! And it’s just getting more attractive.”

His point is that the industry remains extremely attractive for people to move into and so they should naturally move towards a technology career without too much coaxing. He argued: “Labour will move into these attractive areas, but if you are growing at 30-plus  per cent then you just can’t absorb it all that quickly so as the growth slows – and it will slow as prices rise – then eventually you will see prices drop again, so this isn’t going to be a problem when you look at it over a number of years.”

Peter’s very direct and interesting example put paid to a lot of the fears I had heard recently. It’s clear that you cannot just keep extrapolating wage inflation forever based on the inflated numbers we see at present, because in the short term there are a lot of large companies scaling up quickly. Let’s start looking over a longer period of time and thinking about how attractive it really is to be a programmer in India.