Can Wipro and HCL be top two IT service player from India

Somehow my gut feeling says that few years down the line Wipro and HCL would be top two IT services companies from India as against the current pack. My reason is that slowly the area for IT service companies is widening and they are adding more and more services to basket of services they offer. Currently infrastructure management is earning big dollars for IT companies and this means management of desktops among other things for customers. Would it not be a logical extension if customers start giving contract to the service provider to also bring desktops that means buy desktops from the service provider, give it contract manage it and etc. So service providers can offer a complete end to end solution in this. I see Wipro and HCL can do this to their worldwide customers as they already are into hardware.

Missing Spark: Am I reading it correct?

I have been working in IT service industry for quite a few years now and have worked in quite a few different IT companies in India, with lot of and a variety of animals (called software/IT professionals), coming from different backgrounds and different social setup and even from different economic strata of the society. In my view, many of IT professional come to the office to surf Internet, chat with online friends and do some gossip in cafeteria and in between do a little work, if time permits, for which they are paid at the end of month, that too handsomely (I bet if you find even a single software professional who would say that he or she is happy with the salary he/she is getting). Everyone would proudly flaunt their respective companies' (employer's) access card around their necks, like domesticated dogs carry belt around necks, on the streets but would jump onto next company if the pay packet is bigger there. They would not even consider once if because of this action of theirs, the client's work could be impacted and employer's image would be impacted or what would happen to company'bucks spent on their training.

These guys work daily without fail but they do not seem to work for a longer future. A long-term vision is not there which they seem to be trying to achieve. I do not find much in them a spark which says that these guys are inspired in their life to achieve something great. Neither are the so-called IT team managers are smart enough who seems to be inspiring individuals who can inspire the guys under him. All I see in these guys, including in managers, is that they are worried about the work they have to do, not because they want to do but because it is given to them or thrust upon them, then they are worried about next appraisal whether or not they deserve it. Everyone wants bigger and fancier title, bigger and bigger pay-packet without thinking even once if they really deserve what they are asking for and above all the want all this with less and less responsibilities.

And yet another reason of worry among IT professionals in getting fast onto the housing ladder. This is the biggest worry among most as today it has become a huge status symbol and a sort of competition is there among all to get a bigger and costlier house and more number of houses in one's name. This cause them to fight their reporting manger to grant them an ONSITE trip.

Onsite trip grants some guys huge status boost, Huge bank balance and proves that this guy has truly arrived.

The life of an IT professional seems like a fairy tale to an outsider. And as an insider I can say yes, indeed it is like a fairy tell. But all these above perks are, I would say, relatively easier to get because you do not have to do much of an effort to get these. Hard work is hardly required to get all these.

I would say the guys are talented, no doubt about that, if given a challenge they would face it bravely and succeed on it. But that sharpness is not there anymore in most of the guys, all have become blunt. I hardly see these guys talking about doing something greater in life or in next few years, or creating some vision and discussing some ideas. No, this never happens or to be politically correct, it rarely happens. But since these are knowledge workers and so-called brightest engineers from our academic institutions, so it's their responsibility to think on those lines, to imagine a better future not for them but for others in society. This is a real pity. We can not blame govt. at the centre for this because I don't remember if it has imposed any tax for imagining a better future for our society. Still they do not do this.

And just imagine the price we are paying for all this inactivity. We may me missing on some visions or some opportunities which would have become realities and would given something to the society at large.

I would have to blame someone for this huge problem. Two roles come to my mind who could be squarely blamed for this nation-shaming problem. One is the teacher who never taught us to think or imagine and this was his/her responsibility. Teacher never went beyond giving us some rote lessons and checking our homeworks.

Second role to be blamed for this is IT professionals reporting manager. As a manger RM is responsible to mould a rookie engineer into a thinker. But I feel these RMs always feel why should he spend his time in improving an engineer anyway she/he will leave company as soon as he gets a better job or he would go to another project under another RM. So there is hardly any culture in industry where employees are made to think. They are not taught or guided as to how and what to think.

Here I am also part of the above herd.

Career Confusion: Loyalty vs. Money

People working in IT service industry are always confused about their career. They are always in dilemma whether to stay put in the same company to move up on the ladder and forgo the chances of more money outside or opt for job offer from another company for more money and a higher position. There are always confusion, one have to spend long time on bench sometimes even around year doing almost nothing. This sometimes frustrate guys (smarter guys make use of this time to hone their hobbies, interests).
Then comes the time when recession starts and everyone including the loyalist start fearing about their job. Here probably everyone has the risks of loosing his or her job.

Keeping promise: At the cost of other’s life!

Infosys has been telling (or boasting) all along that it will honour all its promises of job offers made out to the campus recruits (close to some 16000). Infosys has also got a huge bench of over 25000 staffs. So if Infosys is to be believed they will have 41000 free people to be employed in this financial year on various project (this figure may be little less if attrition is to be factored in). This tells that the company must have so much work coming its way (pipeline in industry jargon) in near future which can absorb all new and existing bench employees. There is also news that more staff would come off project this year.
But in contrast, Infosys itself has been telling that there will be almost no growth (projected 1.5% in rupee terms) in current financial year. Now we hear that company has asked its employees who are on the bench to work for its BPO arm. I understand that if company do not have enough work then it should ask employees to work for associate companies. This way jobs are saved, employees get to learn new skills and associate companies get resources when required without recruiting from outside. But what’s point in sending your existing employees to associate companies against their wishes and recruiting new (which Infy is doing by honouring its campus promises). If company does not have enough work why should it hire more which impacts job securities of its existing employee, severely impacts company financial affecting shareholders.
There is a famous saying in Ramayan “Jaan Jaaye par wachan na jaaye” (Keep your promise even at cost of your own life). Infosys seems to be following this saying, but with a little twist. Twist is that if life has to go it will not be its own but that of its employees. How unethical!

Infy Guidance: Impact on years to come.

The result by Infosys yesterday were not that bad, they were almost on expected lines but what guidance Infy gave for the year ahead was really SHOCKING. Infy gave guidance of just around 1.5% of growth in rupee terms (a negative growth in dollar terms, worst still). This was the most shocking news of yesterday and I would say of this year so far.
Implication of this piece of news is:
1. Infosys is considered the bellwether of the overall Indian IT services industry and any trend set by it is considered to be replicated by the overall industry. So we can safely assume that the overall IT industry would also grow at the same rate. That is almost a 0% growth.
2. As there would be hardly any growth in IT service industry so there would not be need for new recruitment and certainly IT industry would like to rationalize their existing bench (generally Indian IT companies maintain up to 30% bench strength). This means there would be lay-off of resources that are currently on bench in companies.
3. Real estate in India is almost singularly dependent upon the uptake from IT industry be it for commercial or residential sector. So as a result I would say it’s safe to say that there would be no takers for real-estate that means the property prices are going to CRASH badly and LOUDLY in a years’ time.
4. Indian IT industry employs a huge no. of youth. As there would be hardly any growth this year so there is going to be significant problem of unemployment this financial year.
5. As lot of industries, home loan, financial industry to some extent and many more industries depend directly or indirectly for their growth on the growth of IT industry, so these industries would not be growing and that would impact employment too. So ultimately India would see huge unemployment problem among the educated youth (thankfully for political parties the election would be over by that time).
6. Infosys is saying that there would be hardly any new requirement for IT services in their target markets (western world), that clearly says that there would be no growth in those economies for this financial year. So a badly needed pickup in economic activities are still at least a year down the line. This means if we reasonably assume that economies in the west would start picking up only after this financial year (if nothing goes wrong now of which there is no surety). It would take at least a year for western economies to take off and then they will generate the requirement for IT offshoring so Indian IT companies should wait at least 2 year for their services to be required.
7. When in 2000 dotcom went bust, IT industry in India was impacted in 2001 and it took another 3 years for requirement to pick up. It’s only from 2003 end that serious recruitment started by IT companies. Which means a small problem like dotcom took two years off from the job market growth in India. Assume how long it will take this time as the problem is far far serious this time.

Impact of the World Recession on Indian economy

Recession has already arrived in US, UK and major EU economies; China is also going to be affected badly. China’s growth is going to come down from 12% last year to around 8% this year which is a big hit on its growth. So there is overall slowdown in the growth of the world economy so the impact of recession is going to be felt definitely in India. Here in my view how some of the sectors would be impacted in India.

Stock Market
As already seen, Indian stock markets are down more than 60% from their high point. So we can already see the impact there. As more money dries up in the world this is going to impact stock market in India further. The bull run on Indian stock markets have been due to easy availability of cheap money in the world market but this is no more the case now so we are not going to see the same high for few years now.

IT and BPO
Indian IT has always survived because of the western economies, as major western economies slowdown the work being offshored to Indian IT companies is going to freeze in near terms as client cut on all unimportant work (and some important work too). So there will be less work for IT companies in near term. This will trigger job cuts in IT in west and India. This is already happening in India, though will be on very low scale as compared to the west.
But in the long term, as the western economies start getting back on their feet, they will generate more IT work and then they will not have enough IT workers (after having laid off in current recession) so they will offshore more of that to India. Also the rush for efficiencies in the operations would drive more work to offshore so we will see better future for Indian IT in medium to long term.

Housing and real estate
Real estate in India is going to suffer badly, even if govt. tries to provide any incentive, which real estate industry is asking for. As most of growth in this industry came from speculation and false future projections, the industry is going to have a hard landing before picking up again. With likes of Lehman brothers gone with the wind, there will be less of outside money to invest in real estate in India, so realism will set in here. Already the stock prices of major real estate players are down more than a shocking 95%. It was pure speculation.

Infrastructure
Infrastructure projects like, roads, ports, power etc. will suffer because of difficulty in getting money and general aversion among investor for any risk now. Also Indian govt. does not have money like China which can spend on such project to stimulate the economy.

General Economic Reforms
Already Indian govts. have always been reluctant to go for far-reaching reforms. Now they will be more so. And political parties like Left would be making more noises now. Seeing the mayhem in the world financial markets govt will be very cautions to go for any reforms. Also earlier US govt used to push for reforms in India but now they would be shy in doing so one for the mess in their backyard and second they do not have a face now to show to the world that free capitalism is the only way to go. This will slowdown the economy.

Non-IT export
We have already been hearing news of layoffs in export oriented industries like gems and jewelry, apparel, leather, auto component etc. The impact of this is definitely there on general economy.

General Economy
Though we hear people say that Indian fundamentals are strong and we can sustain our own growth but that is like running away from reality. Because of globalisation we are now more linked to the world economy than anytime in future so if world is suffering we cannot remain immune to it.
When all industries are slowing how can we expect the general economy to grow. Never. If IT slows down it impacts job market and the easy spenders, related ancillary industries gets affected too due to this. If there is slowdown in infrastructure then that would impact cement, steel and other industry. So we can see that almost all the industries of the economy are going through the rough phase so there is overall slow growth.
But we in India have lot of optimism as we can see the light at the end of tunnel. So this time is just for reflection and to prepare ourselves for better times which are just around the corner.

Credit Crunch to hit Indian IT? No

Most of the Indian IT companies work in supporting legacy application, application development & management, BI & data warehousing and BPO services. These are the areas, which are very essential to support the day to day running of businesses. These functions are crucial to running the businesses. So these are the areas where businesses can not afford to cut back. Because even if these are bad times they can not abandon their existing systems or cut back to support services to their employees or customers. They need continued support to run them.
Also businesses need to keep enhancing their IT systems and processes that are required by regularatory requirements like BASEL II, SOX, etc. Such requirements can not be postponed by businesses just because there is recession.
So I strongly believe that Indian IT outsourcers would keep on getting their business from international clients.
In fact during recession, businesses would be looking at cutting cost down so they would be evaluating more areas of their IT spending which could be outsourced/offshored. So it may even open up new business opportunities and increase the business for outsourcers.
It’s the high-end consulting business which may be affected in big way as businesses may not want those services and Indian IT companies have hardly any significance presence in that area.

Emerging IT hotspots in world and competition to Indian IT

A lot is being made out of Chinese threat to Indian IT industry and also threat from other emerging cheap IT labour markets like Eastern Europe (Hungary, Poland, Czech Republic), Latin America (Brazil, Argentina), China, East Asian Countries (Malaysia, Philippines), Russia, etc. But I don’t think any threat from any of these countries at least in next 10 years.
The reason why I think so is because the Outsourcing industry in the world is flourishing because of following three reasons:

• Cheap IT/ Engineering labour,
• English speaking skills and
• Easy and quick Scalability.

All of these three skills or differentiators are equally important for a country to be a real outsourcer and a real threat to India. Because if you have engineers and they are not cheap no point (case is Russia), or you have cheap engineers and also in abundance but no English (China) no point and you have English speaking engineers but not in abundance (Latin America, East Europe and East Asia) then again no point. And all these three above criteria are satisfied by India only.
A lot is being made of China that China will be able to teach English skills to all its engineers in no time and it'll be a threat. But teaching English is no child's play, it take years to be comfortable wit it. The biggest Chinese IT outsourcing company's turnover is not more than $300m in 2006 and that is no match for TCS and Infosys of India. Also most of Chinese companies’ work is domestic.
Another thing IT project management skills (5+ year experience) are costly in China than in India. So the so-called cost advantage of China over India is just a mirage not reality. Also China mainly caters to Japanese market because Dalian area in China provides Japanese speaking resources. There is hardly any work being done for non-Asian market in China. Similarly other countries like Russia, Brazil, Philippines, etc. can not provide scalability which is required in any service industry. Outsourcing jobs requires huge numbers of engineers which are not available in these countries.But all these countries can be very good partners for Indian companies. Indians can utilise these countries by setting their operations in these countries and can tap their local market. So I feel there are more opportunities for Indian IT companies in these countries then threats. Like Indian can open centre in Russia for high end IT work and product development work because of the excellent talent there. Latin America and Eastern Europe could be used to cater for non-English clients. China and Eastern Asia can be used for servicing local and Japanese market. So emergence of these new hotspots should excite India rather intimidate.

China a Threat to India in IT? Not at least for now!

In last 4-5 years if anyone has said that China could be a major competitor to India in IT outsourcing & BPO business, it would have definitely sent shocking waves among big IT players and even among IT professionals (they stand to loose jobs).
Media, especially the research firms like IDC, Gartner & Forrester had been proclaiming from perch top that China was going to be a big powerhouse very soon in IT outsourcing and India should worry about dragon. They were predicting for this to come true as early as by 2007. Everyone was saying so looking at the way China had been making strides in manufacturing and the way it was improving its hard infrastructure. And for us as well there was no way but to believe because if Chinese think of doing something they would make that happen at any cost. That’s the kind of reputation they have got.
But nothing significant in IT outsourcing industry has happened so far in China and I don’t see this happening for at least another 7-8 years. That’s when it may be starting to emerge a contender for competitor, still it would not be a competitor. That would still take few more years from there if Chinese are prepared.
Today there is not a single IT vendor in China worth its salt. There are many outsourcers like Objectiva, Bleum, etc. but they are just fringe players who would either never become serious players or would have to try too hard to become one.
Here are some of the reasons why China can not just become a serious IT player in IT outsourcing business:

1. There are no big IT companies comparable in scale to Indian giants like TCS, Infosys. Today to bag a big outsourcing contract you have to show scale. Otherwise you can just become a body-shopper.
2. Project management experience is one thing which you can not learn in an institute or college that comes only from work experience and India has that in abundance. Indians have been working in IT industry for decades now and so they have built formidable skills in this area which is their selling point and also huge differentiator.
3. Even though the IT industry is so small there in China still attrition in China is more than 20% as against 15% in India. Not so goon signs at the inception.
4. The experienced IT resources in China are 50-70% costlier than in India. Even the entry level resources are not very cheap in India and those are also not English speaking so the cost factor is hardly an advantage.
5. Patent and IP protection is biggest problem in China and IT being such an important and sensitive area for customers they would think twice (or more?) before sending work to China.
6. Should we mention English as one of the reasons? Can Chinese learn English in few years to become strong contender? Most of the business world over happens in English, even in non-English speaking countries.
7. Nothing works in China without guang-xi i.e. connections, so for an outsider if they have to set up shop they either have to tie-up with local partner just for guang-xi or wait for years to grow whereas in IT you have to be very fast and nimble. International players like IBM, EDS, and TCS may not find it easy to grow there as they have grown in India.
8. IBM, Accenture and EDS have been in China for 15-20 years still their service staff is minuscule that tells what the current IT environment there is.
9. Indian IT is not because of government support or any institutional support but because of entrepreneurship of some individuals. In China it’s government that is pushing, but govt. can set up manufacturing companies not IT. It’s a people business. Better the people, more is success.
10. China’s one child policy hampers employee movement between different Chinese cities as people normally are hesitant to leave their parents and grant parents.
    
    This is not to say that China can never become a serious IT player and Indian IT should also not become complacent. I’d hope China to come up fast in IT so India also improve its quality and there is overall improvement.

IT Services Vs. IT Product

Indian IT industry and IT players have often been criticised by so-called 'arm chair critics' for being service oriented and not being product oriented. They often criticise companies like TCS and Infosys for not investing much in creating products instead looking for quick money by going after service market where money in relatively easy to be made.
But I see nothing wrong in this. It's with this same service industry that entire India got the confidence which it enthuse today. Before the birth of same the IT industry, hardly any industry was confident enough to stand up on it's own feet forget about going into the world arena but today many players from other industries like steel, automobiles, FMGC, electronics ect. are becoming global thanks to the path shown this IT service industry.
Critics forget this. They forget that to reach to the top one has to take small steps. You can not simply spring to the top but you have to take small baby steps initially then take faster steps and once confident you go into fast lane. That's what IT industry has been doing. Now we are even seeing some product companies in India as well. I will not say that we'll displace US just tomorrow in product space, that will again take time. Moutains can not be moved just overnight, they take their own time. So we'll also take time to build IT product industry.
Critics compare that TCS was even born before Microsoft and they say look where Microsoft is, but they turn blind eye to the environment each of these companies born in. Where India was when TCS was born, that was not the market supportive of any kind of industry. India was a bleeding ground for freed enterprises before 90s whereas US have been breeding ground.
So you can not compare a poor's son with that of a King's when comparing their lives and achievements. But with the kind of environment created by these giant IT service players, not the ground is set for product companies to take birth.