The Great Indian IT Industry

It's results time once again, IT majors like Infosys and TCS have announced their annual results and the numbers are impressive, as always. These large Indian IT companies have been growing consistently at over 30% an year which is much faster than the growth rate of their American counterparts. While some may argue that the American companies like IBM have much bigger base, they are already feeling the heat. The US Big Six of outsourcing - Accenture, ACS, CSC, EDS, HP and IBM-have never been under as much pressure as they're today, buffeted by high costs and an Indian global delivery model that's matured over the years. According to 2006 research by TPI, the world's largest sourcing advisory firm, close to $100 billion (Rs 4,50,000 crore) worth of big-ticket outsourcing contracts will come up for renewal in the next two years and it looks increasingly likely that the US Big Six will not retain all of these contracts in full. Indian champs like Infosys, HCL, Satyam, Wipro and TCS are likely to take away a major pound of the flesh.

All said and done, the kind of work "most" Indian IT companies are doing is "Clerical" at best and they are far away from doing high-end "R&D" work. Most Indian "Software Engineers" today are just copy-pasting code borrowed from Google and creating customised applications for client needs. This leads to a lot of frustration for the "Engineers" and that's why we find most of the IT guys leaving their jobs for MBA within two-three years of joining. How many Indian IT companies can boast of having a state of the art software product that can be purchased off-the-shelf? What percentage of these multi-million profits are being used for R&D purposes? All these outsourcing contracts may seem very lucrative currently but for how long can these Indian IT companies continue to compete on price alone? China may not be perceived as a threat in the IT Industry, but it can surely give Indian IT companies a run for their money in the time to come (atleast on the price front). It's time our companies started to set aside some share of their revenues for R&D purposes, if the Indian IT champs want to be of the size of Microsoft, they cannot afford to remain pure Project-based companies. We must start looking at developing new products - ERP Software, Document Management Software, Word and Image Processing software, Software that addresses the untapped market (the Blue Ocean Strategy).

Hopefully, the guys at the top are smarter than we think and they are already working on these lines.

P.S: No offence meant to anyone. Standard Disclaimers apply ;)