Indian IT shakedown

Us economic downturn will coerce Indian it firms to look at pink slips to offset their
revenue earnings

Is the 2001 US ghost revisiting India? Considering the slew of pink slips that are flying by the day it does seems that the US ghost has begun to bug the Information Technology companies across India. Suddenly it looks like this blue-eyed sector is cruising through a dark alley, as it is smacked by a triple despair -increasing wage costs, appreciating Rupee and impending recession in the US.

On February 6 morning, 40 staffers at Yahoo India were in for a shock. The brief note to these sacked staffers were: "Pack your bag in half-an-hour. Don't ask for an explanation. Thanks for having been part of our team". For some who had slogged for a number years this diktat came as a wrecker. They sulked in their seats and beyond that could do nothing but to pack the bags. With just two-months severance package they left the place that had given them pride. What has sent shivers in the spines is that the SWITCH companies (Satyam, Wipro, Infosys, TCS, Cognizant and HCL) are also seriously contemplating on the staff downsizing. For records the SWITCH commands nearly 50 per cent of the workforce in this industry. The immediate axe that is expected to fall will be on the 'bench warmers' who constitute about 20 percent of the total workforce.

The economic slowdown and the outsourcing backlash in the US in 2001, shook the Indian IT industry. Many of the companies were crippled as projects dried up forcing them to down shutters. Considering a similar onset of recession impending in the US will the Indian IT industry sail through such bad times is a question, many experts are pondering. Says an IT expert Srinivas: "This is definitely an indication to the Indian IT Slowdown. Sub prime mortgage issue in US is the real culprit. Due to this all major banks are staying away from new projects or enhancements and trying to cut down the resources".

Many of the Indian IT companies heavily depend on the US economy for their revenue generation. Infosys, Wipro, Satyam, TCS and many other 1500 Nasscom registered companies generate more than 50 percent of their export revenues from the US. That is the reason why if there is downturn in the US economy it directly means that Indian IT companies are in for serious trouble. Despite a serious attempt to immunize business interest in the US and spread the basket to Europe, Japan and Middle East the IT industry has not been successful in notching up meatier projects from these region. Moreover, not many IT companies are into product development making the task that more difficult. Indian IT companies have been for long driving the dollar wagon doing the service oriented job. Says one of the top honchos based in Bangalore: "I work for a USA company and we have Indian offices. We do low level engineering and QA from these offices. For the past few years, we are facing with escalating salaries (40 percent ), enhanced attrition (20 percent), and are having trouble hiring senior engineers. We are fed up and are seriously considering pulling back".

But does that mean it is a meltdown for Indian IT Industry? Many experts feel that it is this crisis period that made India a shining star in the global IT space. They are of the opinion that cost pruning will force US companies to push more projects into the hands of the Indian IT companies. In addition, many aspects will get rationalized. Says a software analyst Ashish: "I think this is good sign, for one.balancing the rise of salary, secondly.allowing startup company to match the salary , change the perception of career seekers to look to startup (if BIG can't guarantee job, why not try with startup and grow double in career.) and fourth motivating upcoming entrepreneur to try a risk route i.e. product development/different service model and plan long bootstrap and just not follow traditional outsourcing route".

Meanwhile, the US recession has a silver-lining. Atleast now the Indian IT majors will be forced to look at domestic expansion which is more lucrative than the export market considering the non-existent tech market in India which constitutes a mere five percent penetration.

THE PANACEA
Although the US recession and the shrinking dollar are real indicators of a slowdown in the Indian IT industry, experts feel it still can be prevented considering…

The number of Indian startups (both international and domestic) are increasing.
Product-oriented companies or service-oriented companies with new products are increasing.
The domestic IT market is expanding.
Top notch IT majors are assuring that the US slowdown will not affect India.
The foray of Indian IT services in non-US markets will increase

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