Jain Temple

Hot Spots

India Links
Call Home


Art & Culture
Book Shelf



About Us

Contact Us
About Us

Article by Mohan Babu


Growth of the Indian IT industry

If the Indian IT industry continues to grow, a few large players, especially those that are merely banking on past performances and goodwill, are bound to falter, believes MOHAN BABU

Indian IT majors are beginning to project a uniformly optimistic view of the forthcoming fiscal year. Case in point, Infosys, during its first quarterly announcement (Y 2005) painted an extremely rosy picture of its growth, setting the expectation for about a 40 percent growth during the coming fiscal year. Two major factors contributing to this buyout outlook include subsiding ruckus over outsourcing and the strengthening of US dollar (against the Rupee). The resilience shown by the American economy, which incidentally accounts for a large percentage of Indian IT exports, is also helping. The signs of optimism are everywhere in the Indian IT landscape, ranging from statements emerging out of executive interviews to optimistic reports from industry bodies like Nasscom. Behind all the signs of optimism, however, there are a few voices of concern over the trends shaping up.

A leading Indian business in a recent article set a cautious tone with the following remark “Finally, in the very success of the Indian IT companies lies the seeds of a future tragedy. The stocks have appreciated significantly in the past 12 months, so much so Infosys, Wipro and Cognizant all trade for more than 35 times the calendar 2004 earnings estimates. This means investors need to pay even closer attention to the risks.” The article went on to analyse various issues, including attrition at top Indian companies and added, “IT biggies like Wipro and Infosys are not only losing people at the entry level, but also experienced professionals at the middle and senior management level. The top Indian IT companies starting to lose key software developers, project managers and high level executives to leading US tech companies such as IBM, Oracle and Accenture.”

I began to think of some of the issues raised by the article and exchanged notes with some of my knowledgeable peers who had an insight into the trends in the Indian IT industry. One friend responded saying that he believed that the churn at the middle/top levels in Indian companies might in fact turn out to be a blessing in disguise since it would lead to more opportunities for juniors to move up. He also felt that for the kind of work being done by a majority of software services companies, most people weren’t indispensable.

The vacuum created by the exit of a few senior project managers or a delivery head are routinely being filled by eager second-line managers. More than a conscious risk mitigation strategy, the existence of a ‘pyramid structure’, coupled with aggressive hiring during the past few years has ensured an abundant supply of talent in many of the large organisations.

Another factor propelling Indian IT is the fact that the business is “highly commoditised” and the business models of most large software service organisations have been built around economies-of-scale. It also helps that the sheer momentum created by stratospheric growth during the late nineties has lead to sufficient inertia to sustain the current pace of growth. The fact of the matter is that the growth has definitely “slowed” from ninety or hundred percent during the late nineties to thirty and forty percent growth the industry is currently experiencing. This relative slowing of growth has by no means deterred investors for whom a forty percent growth is still hugely appealing; the Indian IT industry still promises higher returns and growth than most other sectors.

Issues like high rates of attrition are also moot since attrition in one or two companies leads to a widening depth of the overall talent pool available in the industry. Added to this is the ‘reverse brain drain’ of Indian NRIs and technologists overseas who are not just observing the trends but are also beginning to return back to partake in growth. At a macro level, Indian IT is bound to see a sustained rate of growth, regardless of the issues faced by individual players.

And, this is where I would like to end my discussion of this topic by wondering aloud: “If the Indian industry continues to grow, a few large players—especially those that are merely banking on past performances and goodwill—are bound to falter. What would it take to trip the 800 pound gorillas that are merely moving because of sheer inertia?” Any thoughts and comments on this are more than welcome.





About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
  • Sponsored Advert

    Advert: Visitor's Travel Insurance

    Click for free online Quotes


    For FAQ, Trivia and Information on Life in America, visit the Ask-A-Desi section

    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


    GaramChai® 1999-2005