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HindustanTimes Wed,22 Oct 2014

Indian IT surfs out one more crisis

N. Madhavan, Hindustan Times   April 25, 2010
First Published: 21:56 IST(25/4/2010) | Last Updated: 22:01 IST(25/4/2010)

After stellar results from Tata Consultancy Services, Infosys, Wipro and HCL Technologies over the past couple of weeks — which also saw Mahindra Satyam complete a year in a born-again avatar — India’s IT sector seems to be on firm ground again.

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The detail varies between these companies on the profit margins or overall growth, but their profitability and solidity are not in doubt.

You can quibble, of course. Both Infosys and TCS have announced hefty wage increases, which means their costs are going up, while Wipro, which has not really done so, is suffering from staff attrition.

IT service companies seem to be forever in a damned-if-you-do and damned-if-you-don’t situation. It is not rocket science really, when you realise that they are in the business because of high-skilled work by a smart army of knowledge workers.

This army is smart enough to jump ship if the opportunity arises.

A good part of the solid results in 2009-10 could be attributed to a double advantage. On the one hand business did grow in volumes on the back of old orders as well as new ones obtained no doubt in a less-booming market. On the other hand, IT employees spent a year in which, humbled by the global meltdown and the reality of a US recession, they lowered their expectations and ambitions.

Such honeymoons don’t last forever.

But I take this opportunity to look back over a 20-year period in which India’s IT giants have seen ups and downs that included the Internet bubble of 2000, the 9/11 event in 2001 that hurt the US economy and then during two US elections, the controversy over outsourcing that threatened to choke orders.

And the biggest of them all hit in the financial meltdown two years ago that hurt their best customers.

They say tough times don’t last, but tough people do. Indian IT giants have repeatedly shown that their managements are flexible enough to stay at the crease and bat for more runs.

The recession proved to be a big opportunity for HCL and Tech Mahindra to make big acquisitions (UK’s Axon and Satyam, respectively). Infosys blew its chance, but is always proud to wear its conservative purchasing practices on its sleeves (It’s still got lots of cash, if you don’t mind).

All told, Indian IT is now like a soap opera. There are highs and lows and changing patterns but the show goes on well.
The moral of my story is simple: don’t be in a hurry to write it off, just because they started out with cheap wage workers. Most of the action is now either at smart management, or in focusing on emerging opportunities. On either count, I don’t see a case for sunset.


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