Saturday, June 13, 2009

Economic Recession and Outsourcing Industry of India

The current economic recession has hardly spared any country on earth. Rich countries like USA, UK, Germany, Australia, Japan, Canada- almost all the rich countries have got badly hurt from the recession. Even a living legend like Tiger Woods has lost his sponsorship deal with General Motors. So, there is no reason to be surprised to know that Indian economy is also getting hurt from the global economic recession. For India, it is even a bigger problem because India is the land of IT outsourcing and a lot of large western companies outsource their IT services to Indian companies. So, it is obvious that the supply of works for Indian outsourcing companies will suffer in 2009. If the global economic recession continues then Indian companies may really suffer even in 2010.

Against this background, 17th edition of NASSCOM India Leadership Forum (NILF) took place recently. There most of the big names of Indian IT industry joined and discussed what should be done at this moment. There is hardly any difference among the industry leaders that recession is really hurting the industry. The main reason behind this bad impact is that in rich and developed countries, big companies are decreasing their IT budget and investment. This scenario will not change unless the condition of those countries improves.

In the meeting, the industry leaders also discussed about Satyam Computer Scandal and they are keen to find a way that would ensure that the repetition of this kind of scandal does not happen in future. I feel that Satyam Scandal came at the worst possible time. It happened at a time when Indian government and NASSCOM should have been very busy about dealing with the global economic recession. In stead, they had to spend a lot of time and energy after the Satyam Scandal. Satyam Scandal showed the world that India has some serious problem about corporate governance. It seriously cast a dark shadow in the outsourcing sector of the country. The worst part is that it received a lot of negative coverage in Western media.

Some Indian companies are taking a serious look on the domestic IT market of India. India may be the no. 1 player in the outsourcing field, but the reality is that more than 90% people still do not own a computer in the country. So, it is true that there is enormous room for growth in the domestic market, but at the same time, you have to remember that India is still a poor country and Indian government is not so much willing to spend a lot of money in the technology sector. For example, Indian decision makers did not join the OLPC initiative. So, most children in India still do not have any idea about information technology. E-commerce is yet to take off seriously in the country. Almost all the people living in the rural areas still do not have any idea about internet technology. So, yes it is a good thing to think about Indian government investing in information technology, but it is still a dream that has not come true.

With the condition of global economy becoming worse day by day, many other countries (involved in the outsourcing sector) will have to fight harder with India for getting projects from western companies. I am afraid that there will be more competition for less amount of money. At this moment, China and Philippines are the two major rivals of India in outsourcing industry. If the economic recession continues for a longer duration then it is obvious that outsourcing companies from some East-European countries will be forced to lower their prices and attract Western companies. If that happens then it may bring more disasters for Indian companies.

NASSCOM leaders are still optimistic and confident that Indian outsourcing industry is strong enough to survive the tough time. I have no doubt about it too. However, I feel that more funds should be invested for carrying out high quality research in Indian universities. Yes, it is correct that Indian companies are doing very well when it comes to outsourcing of software services or call centre. However, if you take a look at your PC then can you find even one computer program (software) that is made by an Indian company?

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