When I told that my neighbour was an IT commissioner, my friend was quick to ask, 'Wasn’t that a strange designation? I know Program manager, Team manager but how is this designation ‘commissioner’ going well with the customer?’ I clarified to him that ‘IT’ can also mean ‘Income tax’ and not just ‘Information technology’. Such is the power of IT (Henceforth mean only ‘Information Technology’) that every young Indian identifies the word with software companies.
I met my friend after a long time. The person who was once roaming around the ‘agraharams’ of Mylapore with a six yard dhoti was seen wearing a ‘Tommy Hilfiger’ T-shirt & a low waist jean. The boot actually weight lifted him by 3 inches with the Woodlands logo clearly visible. With the sign of prosperity - the tummy and a French beard he addressed me ‘Dude’. His transformation has been phenomenal & no wonder why every graduate wants to join an IT company, whatsoever his/her specialization is.
When Texas Instruments started in late 80s, no one would have guessed that the IT offshore market would cross $50Bn someday. Currently, 4% of our GDP & one fifth of our total exports are contributed by IT industry. Close to 2.5M Indians are employed in these companies, which translate to 1.25 crores direct dependency. (assumed for 1 earning member, there are 4 dependents). Over $12Bn of the total offshore revenue comes from BPO & going by the logic of $24K average realization per employee, the total dependent population of BPO comes to 26 lacs. When one talks about India’s growth story, the reference to IT/ITES is inevitable. The boom here propelled real estate, retail, tourism, automobile, travel/transportation, financial sectors thereby creating a multiplier effect.
This industry is growing but will India continue the momentum & retain its pie?
The US government has increased the Visa fee. Mr. Obama has started threatening the companies which are outsourcing jobs about the withdrawal of tax benefits. The Ohio government recently banned outsourcing. Though this may not have a significant financial impact in the short or medium term, one cannot rule out the psychological effect of these protectionist trends since US geography contributes more than 60% of Indian IT company’s revenues.
Only few years back the word ‘Bangalored’ meant job outsourced to India. That’s coz India remained the top outsourcing destination for the world. Today we have several countries like Brazil, Philippines, Mexico, and Vietnam which are giving stiff competition to India. Take for instance, China! The Communist government declared 20 destinations as outsourcing hubs & declared IT as their priority sector. Considering the aggressiveness the Chinese shows, we cannot really rest on the advantages which we naturally inherited like language, work culture etc. In a recent analysis, Gartner has mentioned that India’s share in outsourcing may reduce to 60% from the current 80 – 90%. Indian IT Company’s buzz word today is ‘Near shoring’. All major Indian IT biggies such as TCS, Infosys, Wipro, HCL already has near shore facilities in places like Atlanta, Romania, Polland where they are planning to recruit significant number of natives.
Leave alone the external factors, there are internal hiccups too;
(a) The cost of doing business in India is increasing!! The projected salary increase in India this year, as per Hewitt’s report, is 11.6%. Assuming, India continues the growth momentum for the next 15 years and assuming the salary increases around 10% YoY, in 12 years time we will not have any wage arbitrage between India & USA (On an assumption that US salary will increase by ~3% YoY during this period). In 3 years time, Philippines will become the preferred outsourcing destination than India. Though some may cry foul that the working population in India is much higher, the prospective or ready talent availability remains a challenge; thanks to our poor primary, secondary education & poorly implemented reservation policies. This again increases the hiring and training costs for the companies.
(b) The government is piggy backing on the removal of SEZ benefits citing irregularities (as though none of the other government schemes has).
(c) It is estimated that the total population in Indian cities by 2030 will be twice the size of USA. But still we do not know what ‘infrastructure’ means.
(d) We also have naxalism, terrorism, red tapism in abundance. Corporate scandals like the one happened in Satyam create a negative impression on our moral or ethical practices & integrity.
Are we approaching the dark or is it just a temporary cloud that’s …. Only time will tell what it holds for this sunrise sector. …..
Ever hoping,
Hari
No comments:
Post a Comment