CHENNAI, India — From his perch atop one of India's most successful software companies, Lakshmi Narayanan sees a potential storm brewing.
His firm and others like it have had little trouble finding first-rate engineering graduates for entry-level jobs, capable young men and women lured by the glamour of cutting-edge work and generous salaries.
But a shortage of talent is looming that could put a dent in India's reputation as the world's information-technology outsourcing champion. Three or four years from now, Narayanan and others forecast, qualified engineers in India are going to be at a premium as companies like his vie for their services to sustain the industry's remarkable growth.
"Clearly there's going to be a challenge," said Narayanan, the president and chief executive of Cognizant Technology Solutions Corp., which produces business system software for such clients as Wells Fargo & Co., Aetna Inc. and ACNielsen.
The imminent dearth of talent may come as a surprise to observers in the West, where India is popularly perceived as an engineer factory, churning out every year hundreds of thousands of well-trained, highly motivated, low-cost professionals who are ready to join the country's growing army of technology workers.
To hear many American officials, academics and business leaders tell it, the huge number of engineers produced by Asia's developing giants, India and China, poses a major threat to American competitiveness at home and abroad.
But talk to executives here, as well as experts in the field, and a different story emerges. The problem, they say, is not quantity. It's quality.
At high-tech firms across India, hiring managers must comb through mounds of applications to find suitable candidates. A report by the McKinsey Global Institute last year estimated that only 25% of Indian engineering graduates were employable by multinational companies. Some executives here are even more critical, putting the figure at 10%.
For China, only 1 out of 10 graduates had the skills necessary to join an international firm, the study said. "You need to be technically skilled. You need to speak good English. You need to understand cross-cultures. The expectations are growing," Narayanan said. "It's no longer good enough just to be a good engineer."
Established players like Cognizant enjoy some advantage in that they can pick the cream of the crop; jobs at the big firms are highly coveted.
But Cognizant and other industry leaders such as IBM Corp. have had to invest heavily in training in India, building entire campuses devoted to molding recruits and filling in the gaps in their education, particularly with regard to so-called soft skills and managerial know-how.
Infosys Technologies Ltd., for example, recently announced that it was investing $176 million in its Global Education Center at the company's complex in Mysore to triple the number of trainees the center could accommodate in a single sitting, to 13,500 from 4,500.
"These are very bright kids -- the basic intelligence is available," Narayanan said in an interview in his office here in Chennai, the southern Indian city formerly known as Madras. "The only question is shaping them into what the industry requires."
The looming squeeze in the supply of qualified engineers in India is starkly at odds with widely quoted statistics in the U.S., which have assumed almost totemic status in the debate over the future of American dominance in the high-tech marketplace.
According to these figures, India graduates 350,000 engineers a year, China 600,000 and the U.S. a mere 70,000.
Officials such as U.S. Commerce Secretary Carlos M. Gutierrez, influential media outlets such as Fortune magazine and the National Academies' Committee on Science, Engineering and Public Policy have all cited those numbers to warn of a gathering threat to American scientific and technological preeminence.
But the origin of the statistics is murky. And recent research suggests that they are, in fact, wrong.
In December, Duke University researchers found that when comparing the number of students earning degrees from accredited four-year programs in engineering, computer science and information technology, the U.S. remained in a strong position, with about 137,000 in 2004. India had 112,000.
China graduated about 352,000, but that figure, based on less directly comparable data, could well include "the equivalent of motor mechanics and industrial technicians," the study said.
For India, the problem is twofold, experts say. Access to higher education has historically been restricted to a tiny fraction of the population. And while trying to widen that bottleneck, many of the start-up institutions offering engineering courses are of dubious quality.