Disclaimer: This article may be subjected to many criticisms.

I would like to assure you that

I am with Indian IT industry and professionals. What I am trying to emphasise here is that we
all need work to address this coming crisis. We need to face the reality that we are facing
today. We have to accept these issues and work to solve the problems, instead of
professionals blaming companies and companies blaming professionals. We all are jointly
responsible for our future and that of our nation. Assuming that the solution would come from
other avenues, such as trade union or regulations is totally wrong. Regulations and trade
unions can function only when a thriving business exists. Therefore we have to make sure the
industry survives and prospers. We cannot just benefit only from the positives of
globalization, but also should be ready to make the necessary changes to stay ahead. What I
predict here may happen in next couple of years or we may have some break. But, certainly,
we are heading towards this trend. With greying of our IT work force, we have to become
more responsible. Companies owe their senior employees. They were the one who helped you
build the huge balance sheet reserves.
The Opportunity: In the mid 90s, suddenly thanks to Y2K and the successive technology
inflection points triggered IT opportunities, India successfully became one of the leading IT
services providing nation. Despite criticism, India and its entrepreneurial IT professionals did
a wonderful job of creating solid foundations and framework for providing consistent and
cost effective IT services to global customers. Our success in the past came from preparing
ourselves for the opportunities that were emerging, not by our design, but by the global forces
acting on its own. We have to have the same mindset to handle the future.
The Demography and Knowledge of Knowledge Industry: Thanks to the demography,
India could bank on a supply of educated young man power with lots of middle class ethos,
who were willing to work hard and change their lives for better. The Globalization and
Liberalization also created more avenues for growth, despite ups and downs and some Indian
Government's flaw. Also, Success was largely due to Governments staying away from this
industry. Before they could understand the structure of this industry, it became successful on
its own largely. Also, the IT industry in India grew because this industry was driven by merit
and finally helped talented from all segments to enter corporate world. In fact, as much as the
so called socially advantaged, as well as the so called disadvantaged also benefited, because
of the nature of the industry and the supply demand equations. I am not here to debate on this
controversial issue. Suffice to say that this industry has been a great leveller. It was achieved
largely because we could empower people from all sections with education.
The Global corporations, particularly helped Indians learn the fundamentals of being
productive, by bringing in their proven management practices. Most IT companies in side
their premises in India were managed as good as anywhere in the world, and sometimes even
better, from ambience to work culture. The Indian professionals creatively improvised
constantly to increase productivity and efficiency, which was seen in the number of CMM
level certifications, Six Sigma successes as well as the ISO certifications, which Indian
companies managed to secure. Perhaps, the biggest benefit that Indian industry and
particularly Indian professionals got during this period is the knowledge of managing

knowledge industries. It is priceless. This is the foundation for our future growth. Something
similar to what Americans taught Japanese after Second World War. The global exposure that
many youngsters got helped them to gain confidence and stand tall among international
community. For the first time in the modern history, perhaps, World had to admit that Indians
are Technically as smart as any other nation. There may be still the debate on quality vs.
quantity continuing. We have to admit that we, Indians, have to work on improving the
quality of our human resources, the correction for which might have to start at School level.
Competition and growing market: The initial price advantage India offered was in the
order of 3 x which steadily has come down, both because of the competition among Indian
players as well as global players who have set-up shop in India. Also, the productivity gains
that came through initial process improvement, tools, technology and learning curves became
flat as years pass by. The most important problem that Indian IT Industry has to face was
constant wage increase in the range of 15-25% yearly. This increase is never sustainable,
even after adjusting for inflation and exchange rate advantage. As there was space and
opportunity, companies competed and accommodated. Sometimes, Employees did not realize
that the gains are also due to market forces, than simply because of their skills or talent.
Also, the supply side of human resources is constantly increasing with more and more
engineering graduates coming in to employable pool, even after adjusting for the quality
issues. The advanced tools and process maturity inside the IT industry makes it easy for
anyone with even basic skills to handle, what used to be handled only by people who were
sophisticated. Further there is constant push from the technology front. On the one hand more
and more new technology is hitting the market daily making the shelf life of most of new
technology less than 2 years. There is also adaption problem and some technology die
quickly; leaving those who spent months learning could not to benefit from them. This forces
the technical human resources to learn constantly newer technology. It is like a non-stop
treadmill. Learning new technology demands effort, attention, energy, time and interest. The
time available with the IT professionals for learning new technology is not sufficient, if they
have to work and deliver the current projects that they are engaged in.
The other side of the story is that newer technology makes it redundant to have talented and
high cost people. Simultaneously the need for even more talented and smart people is
increasing. HR constantly complains that they do not get good candidates. Good candidates
mean the top talent of 1% or 0.5% of the total pool. For example, what used to be projects
based solutions have become products. Projects always demanded more people. The size
equation, which used to be based on number of projects multiplied by the number of people
per project, is different in product space. In the product space, this equation changes to 1
product multiplied by the number of people involved in that one product. This one team has
to be formed with people of very good talent and skills. Any increase in resource requirement
is only on the support side, which does not require costly resources to maintain or manage.
Better still many new generation products are so low in maintenance, thanks to the matured
and innovative architecture and the scalable infrastructure eco-system, or the customers
themselves help each other. Thus the need for man power is decreasing.

Interim relief and the evaporating cost advantage: First, it was the internet related
technologies and now it is Mobile, Cloud and SaaS, which are aiding demand. The IT
services would still be growing for some more years. But, those who entered IT services
industry as human resources in 90s are already in their late 30s and 40s - those days where
there was scarcity for skilled people. These people's salary has been compounding at 15% or
more, which in real terms after adjusting for inflation is about 7 - 8% per annum. The 3x
price advantage continued to be reduced. For example, when you calculate the compounded
growth of 8% (the real rate), after about 9 years, the base wage becomes double. After
12 years it becomes 2.5 x. After 14 years it becomes 3x. For some time, productivity gains
and demand increase could have helped to manage Indian companies keep the lead. But this
is not sustainable for a long period. Productivity gain, advantage due to learning curve, early
mover advantage, currency advantage, branding, customer relationships, domain expertise,
switching costs for customers, and other favourable factors cannot last forever. Obviously
local nations want their people to also get jobs in the high paying sectors, like IT. After all, it
is political. Now, when the wage arbitrage is around 2 x, the overhead due to off shoring
neutralizes almost all the advantage. For many IT services, particularly in areas like product
development and high value adding domain based works, it is better to be closer to the
customers.
Need for change in the mindset of Employees: All these factors are now leading to a
situation, where Indian IT companies have to try other alternatives to make up for their
quarterly performance. First thing the industry may do is the easiest. Retrench high cost and
low productivity resources. It results in direct savings. The next problem that we have among
Indian IT work force is their mindset. In India, everyone wants to become Manager as soon
as they cross 4 or 5 years experience. By becoming Managers they do not want to do the
actual value adding works, like coding or going in to detail. They also think, by this they have
become visionaries! We all must remember only details and execution pays at the end of the
day. Such distancing by IT workforce also leads to lack of knowledge and reduces their
capacity to add-value. At senior levels, in all industries, people have to move on to rain
making roles. Roles like customer acquisition and accounts management and revenue
enhancement. But then, there is only limited space as the pyramid on top narrows. On
technical side, Senior Managers must become architects, product engineers, platform
developers and moving in to core value adding activities. These roles by nature are like sales
roles and are always strategic in nature, which requires higher level understanding of all
dimensions of business and industry, including that of the customers' industry and the overall
dynamics of all factors and their interplay. These profiles demand totally different sets of
skill, which is not being learnt by our IT professionals, who have been so focused on their
technical skills. We cannot blame them, because sharp focus brings in productivity on the
focused task at the cost of not knowing what is going on outside. Companies completely fail
to prepare them for such roles. They award them the previous month for stellar performance
and the next month issue pink slip.
You cannot change the pyramid: People who do hands on work among senior level are
getting reduced. For example, for someone to become a seasoned architect in IT space

requires at least 10 to15 years of working on technology, hands on, and deep understanding
of broader and deeper issues of technology, industry, cost related issues and competencies
related issues. Today, it is hard to find good architects among IT professionals, as we have
more and more Project Managers. Because being an architect demands constant learning and
attention to details as well as big picture, from all angles. To get people to work hands on, the
low cost freshers become a very good source. Companies flock few top campuses and hire in
1000s, even without making sure, whether all of them have any flair for being a programmer
and take them in to training and expect them to perform as programmers. Thanks to the
robust process and structured mass training programs, these people are made to work for a
few years and then they all are made to become costly resources, by way of standard
increments. The companies adapt the same culture that universities encourage, following just
standard paths. In the short term, this is very effective in producing results predictably. But,
learning declines, when people are made to focus very narrowly on following standard
instructions. After sometime, people get used to these standard approaches and even resist
learning new things. Companies also praise them in the short term that they are good and give
them awards. Suddenly when the technology or project changes, the same award winning
employee becomes a costly resource!
Learning from other matured industries: Software industry will go the same path as all
Engineering industries have gone in the past. IT industry would move towards mass
production approach slowly. The early indicators are seen with SaaS applications and
platform infrastructures. The Opensource movement is similar to the standards based
revolution of manufacturing, which helped mass production and easy product design and
manufacturing. There may be still opportunities for some more time to come. But, to
capitalize on such opportunities, we have to think differently. It is not about adding more
resources to the projects. It is not about increasing billing hours. It is all about doing more
with less and producing real value in changing times. It is about both increasing productivity
in the already squeezed environment, by thinking radically to address markets which are
untapped in other destinations, such as places like India, our own country, and other emerging
nations. These markets need products that are different in nature, and may not pay by dollar
billing on hourly basis. These markets would pay you less; it is up to you make this business
viable.
10 ideas to think about:
I recommend the following changes for the industry leaders.
1. Do not crave for rapid growth rate. Instead make sure, you are able to sustain growth rate
by investing on people. Focus not on net profit for the coming quarter alone, but, on building
competencies of your people, in specific niches.
2. Build solutions and products that would solve tomorrows large scale problems, take risk,
and burn a few 100 million dollars from your reserve for this purpose. For every successful
great start-up, there are 10 or 20 fail in the same market. The same applies to you large

players. They should be willing to risk on such ideas which may have the great future
potential but may also be risky. Only when you try 20 such projects, you may hit up on one or
two success stories. This approach requires totally different mindset, not that of the corporate
managers, who is trained to think with spreadsheets of linear models and all successes no
failures!
3. Make it compulsory for your employees to learn new skills for at least 20% of their time.
Give them a pay cut, without retrenching, and long term job and get them ready for future.
The same 10% saving that you would make by retrenchment can be made here. At least you
have better prepared resources. You have to communicate these ideas to your employees.
They would understand.
4. As people grow within the organization, emphasize that both vertical and horizontal
competencies are important and they must be given opportunity to learn all those necessary to
make them leaders.
5. Tell people within organization and convince them that all of them need not be managers.
That working on details and being hands on pays and it is the best security for continued
employment. Encourages and reward people who accept this proposal and make it a culture.
Tell people that we are IT companies not bunch of managers. Coding and Designing solutions
must be respected. This cultural shift is very important. Tell them that the salaries and perks
are not going to be constant and they have to compete with younger resources and face
reality.
6. Promote start-up culture inside the organization, such as 20% spare time project concept
tried by Google. Do not say it may not work. It works and Google has proved. Remodel this
idea without diluting the core of this idea and implement it in our organization.
7. Look for markets beyond the developed nations. For a long time, we got used to the price
advantage. We are almost hitting the ceiling. Frugal innovation and bottom of the pyramid is
not only for manufacturing, but also for the IT industries.
8. Invade emerging areas with a different mindset to become leaders to serve the world,
including developed world, in areas such as IoT so that we can become leaders and gain
market share in these emerging areas.
9. For a long time, we did not concentrate on hardware much. Tomorrow's IT companies
would have complete capabilities covering hardware, infrastructure, devices, software,
project management, implementation, delivery and support. Create your foot print across the
eco-system through industry alliances and standards bodies. Think that we have arrived that
we need not always followers.
10. Believe that the advantage that corporations can gain by retrenchment or fighting
regulations can only help you for a sometime. Think of permanent long term solutions.

We live in interesting times.