Recession and Indian IT services industry


This guest post is bought to you by Prabhu. He covers Indian startups on his recently started blog Desi Startups.

Indian IT services recession Mark (name changed) wanted to outsource some of his development work. A typical outsourcing process starts with bidding, where companies from different cheaper countries including India would bid for projects. He asks one of his manager (An Indian abroad), to take a look at the different bids and choose the cheapest one. After looking at the bids, our Desi manager goes speechless!

The bids received from Indian companies are almost equal to hiring a team abroad and getting the work done! getting the similar work done from countries like Brazil and Mexico is so cheap that they are quite comparable to an amount a typical Indian would spend during casual shopping or when they go out for a party with friends!

The reasons for this are quite simple.

Rupee appreciation (although negated in last couple of months) against the dollar plus Increasing salaries. The services companies are forced to bid higher and higher, in order to maintain margins or at least prevent lay offs, not to mention the hiring process has slowed down to the core.

There are confirmed reports that IT budgets in a number of industries in the US and UK, have been nearly halved. A number of Indians in the US have been sent back, after project cancellations, lay-offs etc. Recent survey from Reuters has also proved the recession that we all are going to witness. The report also says that unlike the previous one, which lasted for just 8 months, this one is expected to last longer.

On one hand, even though some services companies are happy for the fact that they have managed to increase their H1B pool, this recession may literally suppress all this happiness straight!

Kumar (name changed) a typical software engineer in a services company in India is happily welcoming this recession. Even though, this might appear strange, he has some strong points behind. He says, just like US Houses price drop, we are likely to see a price drop here as well. (How in the world an IT guy will be able to pay back huge home loans if his job has no future!). Prices of other commodities are also likely to come down, most of them partly inflated because of IT (Auto fares?).

It will be interesting to see what strategies our services companies adopt to overcome recession and also stay profitable at the same time. Let us wait and watch.

What is your opinion?

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  2. c.priyadarsini says

    Can you send me more details and what is the situation now in BPO and IT companies.After obama order to stop the outsourcing in india and china.Wheather we can stay in this field or not

  3. Priya Kapoor says

    Hiiiiii………..I don’t know any thing special about recession but I must say one thing that many people are suffering becoz of recession…..

  4. rohit says

    what will hapen to those who r persuing there software degree naw. can anyone help me

    1. beatjobs says

      well those who are pursuing their S/W degrees has to fight for jobs with their seniors and experienced people as many in different experience and stuff will be waiting on the Q with u. Guess what u ve to find a way to take it…

  5. Amit says

    Should anyone leave there current stable job in IT sw. company (working since last 2 yrs), in this recession period? (Attracted by some higher paying Foreign company in India).. confused…?

    1. beatjobs says

      Its a global problem and also depends on the IT company which u want to join on how they r going to handle the company…layoff, pay-cut, more work, less benefits/no benefits et., so which ever affects u …u get affected..

  6. Seshadri.s says

    the most mind blowing question about this recession and its feedback is , how long this is going to last. We had already experienced the dot com downfall, as we cannot say this is very similar but the impact is going to be the same. companies operating with low gear investments and companies serving local /domestic markets in large scale may take a leverage out of this situation, but still pressure form the market may remain the same for working community. The only way to face this issue is with open mind, which indicates that saving cannot come from high income but reduced expenses.

    The government as such can bring in an Income Regulation law, which can clearly specify that the project size or value should not be projected as a primary element to salary fixation, but for localities and operational location and period of business.

    A minimum amount of time both from the employer and the employee should be signed and HR policies cannot be a variable but a global one . Which are called as ” Mutual employment Policies”

    But beyond the purview when things happen, the only way to overcome the crisis is to remain silent and look for viable alternatives as thing keep changing from time to time. More Posts to come…..

  7. Navin says

    What will happen to the Graduates passing out in 2008 ? Will Campus recruitment stop ?

  8. rohit says

    what will happen with fresh graduates in it after this recession. this will lead to unemployment to them

  9. RaviKiran says

    This is more broad subject to write.
    but as you said it is going to be fine for next many more years, i too think so and dam sure that it would be more than 10-15 years i would say.
    because there is only India has the talent pool with variant technologies IT industry looking at and most English speaking people available.
    For my more views please read-

  10. kalyan says

    Indian companies do the business,project bidding in substandard way, they have the dirtiest competition. They think they are doing hightech business by doing some office clerical work specially mca’s, BE’s and North Indians…IIT’s are not taken into technical fields, they are taken into software lines writing HTML code, IIM fellows are not that standard and they dont suit the western civilisation or offices specially Barkleys bank etc by getting millions in salary. India for ever doesnt have domain knowledge people as commented by General Electric head in a TV(may be NDTV or CNBC) interview, he also said they are suitable for doing sevice type of work non critical work, what will happen to Honeywells aviation machines if they put substandard code or design in avionics???
    Indian Aqua culture earns more money and more jobs and feeds more families than software industry

    1. surabhi says

      this person needs to improve his diction first rather than pointing fingers on North Indians…

  11. Tanmay says

    IT is a very dynamic industry and even after 20 yrs in India we do not have and standards for salary. The industry is not yet matured.

    Recrutment is totally depend on the need and if companies want resource then that time they are ready to pay anything just to attract the resource. I think during recession people with more pay are in problem. Increasing the living standard is easy but coming back is bit tough.

    Because of IT industry real state rate went up very high, a normal IT guy is having loan of atleast Rs 50 Lack. So the bank industry is also involved in the recession.

    Almost all fresh engineering graduates, irrepective of streams were getting into IT. Because of recession the recruitment will go down and it can create a problem of unemployment in the country.

    Unemployment leads to Crime.

    If IT giants wont be able to handle this recession then definitely country will have bad impact of it.

  12. Upendra says

    All the major project deals are done in the currency dollar.
    If we have to get rid of dollar value recession,we have to change that
    .Deals can be done in stable currencies .I think this is the most
    appropriate solution.

  13. Rajiv says

    well.. there are still people who like freelancing. just because it gives them freedom to choose what they do. for example i am an entrepreneur who has completely run out of money. so the only option that i have right now is to survive off oDesk, Elance etc. and i am ready to beat the Mexican and Philipino rate any day. guess there’ll be more ppl. like me.

    1. Priya Kapoor says

      guys………..can you tell some sites where I can search about the effect of recession on IT companies for my presentation…….Plz……..This is Priya Kapoor from New delhi………My e-id is [email protected]…..

  14. gujjuman says

    The hypothetical scenario where Indian bids are on par with setting up onsite team is not correct. I review bids for telecom major in US from different IT companies, generally it goes like this First world companies > Onsite team setup > India-based foreign companies = latin american + east european based setup > Indian companies offering Onsite+offshore mix > Likes of tcs always planning for maximum offshore. So I dont think we have become expensive proposition. I agree with rupee appreciation taking toll and large financial institutions cutting half IT spendings. I think IT sector will move towards more stability, as Indian It is strong player with vast experience and fine tuned processes. So lets not be that pessimistic.

  15. Saptarshi says

    I do agree with these observations, but its not called ‘recession’. Its just that now prices are stabalizing… Its happens at any growing economy and we have to look at other places and markets. The advantage in India is that the domestic market is still very much growing and thats where Indian companies will start making money…

    Its far from recession and IT jobs are here to stay and pay more!!

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