Wednesday, December 26, 2007

IT in India heading for a fall

Economist in it's post Is India's computer-services industry heading for a fall? talks about the challenges that India Inc. will face.

The reasons that they quote are:
1. Insufficient infrastructure
2. Talent shortage - India Inc. runs on man power.
3. Employee "jumping"
4. Competition
5. Future threats - American economy slump, automation

While I agree to all the points, I have few points to add.

Methodology and capability to deliver

Foremost challenge Indian IT giants face is the struggle to offer innovative solutions. Please note that I am not talking about product companies and only about IT services companies. I have not seen major application development deals being won on the basis of traditional methodologies. There is a lack of ability in solving new business problems.

All IT companies have "Onsite-Offshore model" and their proprietary "development methodologies". Essentially, these are all flavors of the same thing. All of these showcase the company's ability to deliver and how it can help the client go to market with reduced costs. But, you cannot see these IT firms pitching in for new technologies. Atlease not too many of them. If I try to find out, how many IT services firms India have expertise in ILOG JRules or IBM Process Server, there will be only very few who can offer solutions. Unless the client asks for a specific technology to be implemented, or a Software Products vendor recommends a services firm to the client, this never happens. There are CoEs (Center of Excellence) coming up in most of the IT firms to nurture talent and help innovation. But, the effectiveness has to be questioned. Also, the employees in services firms are so busy doing billable work that they hardly find time to spend on CoEs. However, there are new small firms sprouting all over India, trying to provide innovative solutions, but they do not have the nerve to hit big deals. Here comes the other factor, which I want to talk about.


The quality of resources have gone down. IT firms are increasingly relying on Non-IIT graduates, and offlate B.Sc, B.A and B.Com graduates. The justification is that these resources are cheap and the work that we have can be done by these guys. But, with this approach, how will you nurture innovation? Another aspect to the resources issue is career growth. After 2 years of industry experience, most of them wants to get into management side. This, either leads to employee leaving the company, or we end up seeing a lateral hire/fresher.

Quality of recruitment also have be inspected. 80% of the hires turnout to be just machines with no brains of their own. SOA is the latest buzzword. While you see sales team and architects suggesting SOA based approach, how many employees in an IT services firm understand what SOA is? How far can this organic growth go? With dollar value falling and rising inflation, how will we sustain the 10-15% growth in salaries?

Aquisition and merger trend

Yasu Tech bought by SAP. Wipro acquires AMS and Nervewire. Infosys acquires Expert Information Service. And the list goes on ...

This is a good strategy. Inorganic growth, no IT investment required, no more hiring required. Acquiring European firms will definitely help penetration into Non-English market. But, how will they face the challenge of integration issues? We have seen this time and again.

My project lead in one of my previous projects, had told aroudn 2 years back. Most of what we do now will be automated. We will end up becoming machines doing maintenance job. I hope not. All of this when Internet is facing a meltdown in another 3 years.