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Future bleak for Indian IT? Well, no

By Ganesh Natarajan
September 19, 2008 16:34 IST
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Lehman Brothers files for bankruptcy and Wall Street shudders with news of AIG. Washington Mutual and quite a few financial stalwarts are feeling the tremors. A few thousand direct and indirect employees of Lehman in India face an uncertain future. Almost immediately, there are rumours that no BPO job is safe, particularly when it has anything to do with the financial sector.

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On the heels of all this bad news, HP announces the loss of over 24,000 jobs globally and a few Indian firms announce performance-led separations and delayed campus hiring! Is there reason to panic for the IT and BPO industry in India?

Not really - we have seen such worrisome collapses before, the biggest of them probably being the dotcom bust that saw billions of dollars in market capitalisation on Wall Street evaporate and the loss of a sizeable number of jobs.

The industry survived and continued to grow; the only vestiges of that blip are jokes about back-to-Bangalore (B2B) and back-to-Chennai (B2C) that still linger on the campuses of IT companies.

In the current situation too, there could well be a medium-term opportunity to get into the heart of a major IT-led restructuring of the entire global financial services sector.

Indian IT firms are already well-embedded in the development and support processes of most major investment banks and brokerages and the incredible domain competencies they have acquired could well see the employment of thousands of professionals in a redesign of the global financial systems in 2009.

Having said that, there will certainly be trouble in the short term. The global-demand environment has been sluggish since the beginning of the current financial year, which has resulted in a lowering of revenue-growth guidance for the year to the low twenties.

The Indian IT-BPO sector is a part of the global ecosystem that has been facing uncertainties and cannot insulate itself from the travails of its key customers, particularly in the banking and mortgage sectors.

The mitigating factor is that ever since the sub-prime crisis began last year, many companies that were being directly impacted had prepared for this. The industry has already tightened its belts, improved utilisation and reduced bench strength, and this turn for the worse will not substantially change the guidance or the outlook of the significant players in the sector.

Does this in any way impact the achievement of the $60-billion export goals that the industry has targeted for the turn of this decade? The preliminary analysis of the current situation indicates that the impact will be short term and company-specific and though all strategy planners will continue to keep a watch on any further downstream impacts, there is no likelihood of any catastrophic happenings or announcements from the industry in the coming months.

India's value proposition continues to be strong. As an industry, we have worked as partners with our customers and will continue to do so, even as the financial services sector realigns itself.

During the last few years, Indian IT and BPO firms have moved from being peripheral services of contextual services to becoming the epicentre or at least an integral part of the core value chain in customer business processes, which is what gives us the confidence that no process transformation will be contemplated or undertaken without the active involvement of India's large professional manpower.

If there is some panic in the ranks today, with many television channels already pronouncing a fading interest of business schools in financial services and investment banking career opportunities, young aspirants can be assured that the future opportunities are real and promise to be more exciting than the current quantum and quality of work done by the services industry.

Every slowdown also presents its own slew of new opportunities. Companies like iFlex have already established the capability of Indian firms to provide the best in-class products for the banking sector.

The innovation movement initiated by NASSCOM a few years ago and the launch of the NASSCOM-Boston Consulting Group report on 'Innovation in the IT and IT Enabled Services industry' in Bangalore at the end of July demonstrated the industry's determination to create a new sigmoid of growth for the industry.

After successfully using the "value for money" wage arbitrage advantage to get a toe in the door of global multinationals and then making the transition from on-site to offshore delivery through the perfection of high-quality processes and the ability to migrate technology development and business process management to Indian centres, the third wave of success in this industry may well come from innovation, adding a potential $50-billion of new revenues in the next five years through new products, services and business models which will lead to one more phase of industry transformation.

The true imperatives for the coming months can broadly be grouped into three areas: At the firm level, diagnostic exercises on the present state of innovation activity and the path to reaching a desired state of extensive innovation need to be undertaken so that serious projects are planned and executed.

New product creation in intellectual property-oriented firms and process innovation to look at new delivery methods and collaboration with customers and partners should be attempted in all services firms.

And finally, all the participants in the eco-system - the government, research and academic institutions, financing agencies in addition to firms and associations - need to work to build an enabling environment for innovation.

Major initiatives have already been announced where liberal arts and science degree programs in colleges are being augmented with vocational skills provided through a combination of technology and facilitation to transform the employability of thousands of young industry aspirants.

Staying on the path of ongoing success is not difficult for an industry which has grown from under $5 billion 10 years ago to $50-billion-plus in services this year. There will surely be a tryst with a global destiny!

The author is Chairman of NASSCOM & CEO of Zensar Technologies

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