Skip to main content

Current market situation and Indian IT majors..

Here's a summary of the situation as of today in a numbered list:
1.Major financial institutions in US are going bankrupt or being sold at bargain basement prices.This is bound to impact Indian IT companies in two ways: (a) Companies like TCS, Wipro, Infy and Satyam would lose business worth hundreds of crores (b) Companies like NIIT and Patni (which are partly owned by the likes of Merill Lynch and Lehman Bros) may see erosion of stakeholder value.
2. The US Dollar is getting stronger against the Rupee.Yesterday it was at Rs.46.Almost all the Indian IT majors have hedged their positions around Rs.42-43 per USD. So, a weak rupee will not have any positive impact on their revenues.
3.Due to increase in costs, and reduced business from US, many IT majors are contemplating or actually doing layoffs. So far, Satyam and Wipro have bitten the bullet.We can safely expect that TCS and Infy will follow suit, albeit the spin they may give could be different.

So, the writing on the wall for Indian IT services industry seems pretty obvious. Okay, it is obvious, but not pretty :-)
Indian IT majors have to prepare for reduced margins, and reduced business from the US.And with Eastern Europe coming up to speed, winning EU business will become even more arduous than ever.Investments in China are not yet paying off.

None of the statements in the above paragraph are revelations.All Indian IT executives know these things.

The answers are also obvious.

Focus on the domestic IT opportunities ! Reduce operating costs by moving out of the metros into the hinterland of small towns and villages ! Drive the growth of the Indian tech startup eco system!

But none of the IT majors seem to be doing any thing substantial about it.

Problem 1: Indian IT majors feel that domestic small and medium (and even large) companies cannot really afford their services. So, they do some work for the Government and PSU banks etc, but have not really focused on delivering IT enabled value to the vast and growing SMB segment in India.
Vijay Anand did an excellent analysis about this affordability aspect back in March. Check it out.
The main issue is that our IT majors are in an intertia of sorts.They do all the high end talk about consulting, alternative markets etc, but are primarily focused on the low hanging fruit of US staff augmentation.

Problem 2: The IT majors know that domestic market can not be ignored, but seem bereft of ideas about how to deliver services and products for this market without reducing margins.

The answer is to move their delivery centres into the hinterland and charge realistic prices to the domestic customers. And implement hosting solutions instead of on-the-site solutions.
But the biggies don't want to take the risks and create the market. I think they are waiting for mid sized IT companies to come up in the domestic sector, and then acquire them.
The big question is: will it be too late for these current IT majors?Can they afford to ignore the home market and not invest for the future?

More about Indian IT majors and their involvement in the startup ecosystem, tomorrow.


Popular posts from this blog

General Elections 2009 - Analysis of AP Results

Caution: Long post :)

The newspapers, the blogworld, and the electronic media are full of election results analysis this week. With the amazing victory of Indian National Congress (INC) led UPA in the Lok Sabha elections, and the INC's successful defense of its citadel in Andhra Pradesh (AP), hopes have been raised because of assured stability at both centre and state for the next five years.

Even though I am not a supporter of Congress politics, I find it hard not to feel happy about the results because: 1.The Left has been routed in its strongholds and 2.Indian electorate has decisively voted for a National party(though for the wrong one !) ; except for Bihar and Orissa, INC has fared well wherever it was pitted against the regional parties. This bodes well for our polity. I will have another post where I am going to look at the short, medium and long term possibilities for inclusive growth and economic policy under the new dispensation.

For now, I would like to indulge in some ana…

How I (could have) made Rs.100,000 from Rs.25,000 investment in 4 months..

Note:This may read like a story.But it is not. I actually want to talk about an investment idea.But as I can never get to the point quickly, you, my reader, has to read through my 'sonta dabba' (trans: blowing one's trumpet) first.

I have a friend called Srinivas who directed a critically acclaimed, but commercially not very successful Telugu movie. This was a few years ago. Srinivas and I worked on a script last year, and we were ready to meet producers around March of this year. We did meet a couple of producers who showed interest.And then the farming bug bit Srinivas big time.

Actually, Srinivas was always interested in rural development and leveraging traditional knowledge systems along with modern technology.We both had many conversations around how, by creating a database of traditional farming techniques, we could make the knowledge available to every one. We would discuss the script for a while, and then drift into a discussion on farming stories. We both have come …

Kasi Yatra - Part 4

We are back. So, the autos sped through some fairly narrow lanes of Varanasi and deposited us in front of a street with a door at its entrance (yes, a door !). The board read 'Sri Rama Taraka Andhra Ashram'. The place where we had accommodation (Karivena Brahmana Satram) was supposed to be in the vicinity. I called the Karivena Satram manager on the cell and he gave me directions. Apparently, the Satram (travelers lodge) is some 150 m from where we were. The autos wouldn't /couldn't go beyond the spot where we got down. So, I went first through the street-door and after a couple of turns, found my self in an area full of pilgrims from Andhra Pradesh, and a few restaurants doing brisk business in Idli, Dosa, Vada, Coffee and Tea. (Great ! Food won't be an issue in this area, I thought). I found the Andhra Ashram too, and a shop keeper there guided me towards the Karivena Satram.
Thirty minutes later, we were all checked in at Karivena Satram. We took four rooms and e…