Wednesday, May 18, 2005

IT - Om swaha

Om Malik is a writer who makes insightful observations about the happenings in the tech-sphere. His is called a Broadband Blog, but basically contains articles about infrastructure, business and opportunities related to IT.

In this article, he talks about how the outsourcing cycle has reached its peak. The irrefutable proof is GE. I have great admiration for GE, for it has been at the fore-front of many a paradigm shifts and innovations that have come to govern IT. It was the early adopter of CMM, Six Sigma, has impeccable processes (their technical documentation is world class), set-up Indian facility for R&D much before the word 'outsourcing' became mainstream. Because of the bar it sets within the organisation, GE is the hardest task master you will find, as far as IT outsourcing (to other vendors) is concerned. As Om so succintly put it, they can squeeze out profits from even a light-bulb. And they do. Many companies aren't just capable of meeting exacting (and taxing) GE standards and just opt out. The desperate step in. My earlier company, my current company and my next company (what a coincidence!) all have (been forced to) let go of GE projects (and note, I was never ever worked on a GE project).

Anyway, Om makes very valid point about the overheated boom in the IT services. Clearly, its a volumes game, but it is extremely difficult to keep adding people at the pace that we are, to sustain growth. Salaries cost a fortune and wipes out most of the revenues and there is no end to the pay-hike people expect these days (ahem!). Attrition is rampant (ahem! ahem!) and it is difficult to recoup the loss of trained resource easily. It's not just resource replacement - its knowledge replacement. Big players around in IT are either into products and consulting or in different flavors of services/consulting/products. In consulting, Indian companies are still catching up. In products, they are non-existent (with some exceptions).

Consulting is a higher margins game - lucrative. But Indian IT people in general (even the strata that you will peddle as consultants) are not mature enough (fresh MBA types cannot consult, they just hogwash(sic)), not bold enough (limited creativity because of the schooling and society in general), not confident enough (servile ha-ji mentality) and not convincing enough (command over language).

Again we haven't seen the enormous advantages of being in products (Biztact, apart:). To achieve the same growth as in services, you need to add no-where near the same number of people. Earlier, the figures of number of students graduating every year was tom-tommed. Still, companies are finding it difficult to meet the requirements. Also, no one has properly investigated the quality of the graduates that are churned out. I am sure, most of them lack the basic skills needed on the job.

So, its difficult to see a Indian IT services and outsourcing grabbing headlines two year down the line. Services (in IT) will be your average-jyo-manufacturing - expect no great shakes.
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