Our IT sector will emerge victorious
India has, for more than a decade now, been at the centre of the offshoring
phenomenon. Something that has fundamentally transformed the dynamic of the
global economy by stepping up the pace of integration of national economies,
which had till then been fairly self-contained.
Sceptics, in such a situation, were doomed to be wrong in their assertion that
the party would not last. Now suddenly - the first time in so many years and
thanks to the mayhem in the world of international finance - their scepticism
about India losing its shine seems to be acquiring more than a ring of
confidence. But that, in the end, could well be a case of too fast too soon.
In reality, the Indian IT sector could eventually emerge as a winner. Over the
past few years countries such as China, Philippines, Brazil and so on have
already been threatening India's dominant position as the most favoured
offshore destination, a recent 30-country analysis done by Gartner showed India
to be an undisputed leader with China coming up as the greatest challenger.
However, China and other low-cost locations are fast emerging as offshore
destination and eating up India's share in the offshore pie. Now with the
turmoil in the US financial sector it is being speculated that it will
jeopardise Indian offshore industry. On the contrary, this crisis could very
well turn into a blessing in disguise in the long run.
When companies eventually emerge from the crisis they would start thinking of
how to get their work done in a much more cost-efficient manner without
compromising on quality. India still has all the ingredients to be the best
offshore destination for IT services/BPO work requiring significant scale.
As crisis situation starts wrapping up western organisations would look
restructuring at a large scale. This will bring a lot of opportunities and,
given India's reputation and credibility, there's a big role to play for
India's IT sector. It is going to be a time of stock-taking and putting your
house in order.
The key challenges the Indian IT sector (and the Indian offshore service
providers in particular) is facing are rising overall cost structure, paucity
of skilled resources, over dependence on US geography and linearity in business
model. It is high time the Indian IT sector put its house in order and took
some concrete steps to effectively meet these challenges.
Toughest speed bump in Indian IT history
As the dark clouds of economic uncertainty scatter over the horizon and as
sprightly insouciance melts to give rise to a pall of gloom, it begs the
question as to how will the original poster-boy of globalising India, the
Indian IT offshore services industry, cope with the challenging times.
The Indian IT offshore industry has skirted major speed bumps twice in its
three-decade history: the first one in 2000 after the successful resolution of
the Y2K problem and second, after the dotcom bust in 2002. In 2000, the
challenge was of gaining credibility when everyone thought the industry was
only good at writing low-end code.
In 2002, the challenge was that some of the fastest growing markets like
dotcoms and telecom companies that Indian vendors served, bellied up. In both
instances, while the industry underwent grutching pain, it eventually emerged
reinvigorated, giving rise to sustained growth and value creation for
stakeholders.
It looks tough this time though. As world's leading economies synchronously
undergo bariatric surgery to shed the excesses of leverage, IT spends; like
many other spend categories, will splutter. More importantly, the transients
that are induced in the wake of economic disharmonies will lead to greater
uncertainty and slower decision-making cycle for clients that Indian IT vendors
serve.
Wait and watch will be the dominant theme. Eventually, as results from the
strong dose of regulatory policy permeate through the economy and as
predictions of Armageddon give way to the leitmotif of Schumpeterian creative
destruction, the dominant theme will return to business as usual. For a world
coming out of crisis, sustaining cost competitiveness will be an important
driver and offshore IT services will allow enterprises in the developed world
to do more with less.
Indian IT offshore services industry will inevitably gain in magnitude and
recognition. Supply-side trends such as cooling real estate markets, realistic
expectations on wages and a dollar-starved Indian economy will favour Indian
vendors. Furthermore, given that global valuations of IT sector have hit lows
across the board and given Indian companies have strong acquisition reserves,
this makes for an opportune time to fill in the gaps in capabilities through M&A
http://economictimes.indiatimes.com/US_crisis_Opportunity_for_Indian_IT/articleshow/3596134.cms?from_et_daily_newsltr=1
The law of gravity says no fair jumping up without coming back down
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