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IT products / impact on the Indian offshoring industry of the impending US recession

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Its been talked about for a long time now. The US recession sounds imminent. With the high profile exit of Citi CEO, Charles Prince and a couple of others and the US housing bubble caused by the sub prime defaults – President Bush’s sops notwithstanding, the recession odds have now been raised to 50-50.What does this do to the Indian products offshoring industry that, by the way, is still in its infancy stage?

For starters, I foresee a jump in the number of contracts being sent out to Indian IT players – the likes of Symphony have done better than their peers. They also received large scale funding recently.

Why do I say that this will have a positive impact on the Indian IT products industry is because most players here are still US or European companies looking to setup shop here or have already setup a base here.

Their advantages are many. India has long since been known for its code crunching workforce but the products industry requires a different mindset. A few people can match this role. This automatically makes it a low supply but high demand area operating on niche products for the global market. This means wages are higher than those offered to their Indian IT service counterparts. Look at any business weekly – you will see this trend catching on.

The Indian IT service industry absorbs most of the talent churned out by our Indian schools (and these days, a trend fast catching on, from foreign schools as well – in what we would term as reverse brain drain) – but the Indian IT products industry has fewer manpower demands. Here, the aspects such as reliability, scalability, adaptability, portability etc. and the business segment as also price positioning all make a difference to the final deliverable. Its not just crunching out code. But try getting those developers and managers in the current environment. Its not easy.

As I see it, this will only get worse with the supply demand mismatch.

US companies will be looking at low cost but high intellect locations and India and Israel score high on their list. India also has the added advantage that manpower is available in scores but the ones that actually match the profile requirements are few.

The average engineer loves getting his hands dirty on coding in the valley but it ain’t the same here in India. Here, people give more weightage to the job of ‘people management’. Here, it is more a question of prestige as to “how many people one has under oneself’ – an adage I detest immensely because it clearly shows the dictatorial dictate and casts the entire role in bad light!

Th future belongs to collaborative management where managers and developers work in an environment where one can ‘live and let live’!

Bottom line: The US recession (if it occurs) will contract the US job market but this will not impact the Indian IT products offshoring industry. If anything, here the demand for such high skilled labor will only rise exponentially in the coming months as we look upto 2008!


Written by Naveen Athresh

December 11, 2007 at 5:29 pm

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