Theres a section of Business World which is Quick take, the question of the next week’s issue was posted to me via through a friend (PG).
The Indian IT industry has several set backs –
- Lack real technology work – with around 60% of the work lying in the AMC and Testing (Support) bracket, there is dearth of scope for your average Indian techie to get their digits (pun intended) dirty in some concrete techie work.
- Project orientation – Most of the biggies in the Indian IT industry are service oriented, and more concerned with projects for foriegn customers. Their business orientation is towards projects, so much so that the entire organization bases its financials upon projects and their profitability. It may seem as a sweeping statement, but think about it, projects for the same client cumulate into an account. Accounts cumulate into a Geography. How this is bad is that there is no focus on IT products in the market.
- PPP of economies – How can one sustain themselves on pure projects alone? Esp. those that are based on a foreign economy. The moment the domestic economy starts doing better than the foreign economy (read those of the clients), the cost of the project rises (either for the firm or for the client). To remain competitive vis-a-vis other foriegn IT vendors, the indian firm will have to drop rates, losing profitability.
- Attrition – With an average attrition of around 15%, the costs of a project are constantly going up. Whenever a resource switches to a new firm, he gets a pay hike. A pay hike translates into more costs for the same resource. More costs without increasing revenues results in reduction of profitability.
That was my answer, I was a little surprised to learn that theres such a small amount of people who agree with me. No matter, it will be a good thing for India if I am wrong ;-).
You will find the pdf link here.