I am really surprised by the view of the pepole regarding impact of global slowdown on large IT companies. I really feel things have been blown out of proportion without understanding the business model of Indian IT companies and their reason of existence in global value chain. you might be thinking what the hell I am thinking of, when all leading analyst feel otherwise, with due respect to there views lets us understand where exactly business model of Indian IT companies makes impact and what is there role in value addition?
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If u have a closer on look on US, It has been facing the problem to grow as economy not just this year but since the start of the millenium. It is since then Indian offshoring industry has started gaining bones and flesh. Indian offshoring industry has never ever provided any innovative services which there european or american counterparts couldn't provide (yes, sorry to sound anti-mera bharat mahan but it is true). Then why we existed and growed reason is very simple - american companies were unable to scale further but 50-100 bps point rise in margins makes there financial growth look spectacular.
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What is the most important contribution of Indian outsourcing industry to global supply chain? - It is delivery by pepole who are more proper for its execution. That is what in management terms called RIGHT MAN AT RIGHT PLACE. Righteousness is not just decided by the efficieny but also by the cost at which delivery is made (not to be confused by drop in quality) so now same quantum of work is done by some sitting different part of the world.
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That is what Thomas friedman (three time pultizer prize winner) coined as flattening of the world in his book "The World is flat".
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And if you got it right our reason for emergence in global supply chain was-
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True Globalisation: After the 2000-01 is what I consider world has started understanding the true potential of globalisation, previously it was meant to be way of gaining scale for american and european companies with help of there government by asking to remove the protectionist policy by practised by the developing countries. But after 2000-01 a newer type of reveloution started in global economy which started changing game of global expansion which was somewhat 200-300 years started by american and european explorers. But Indian companies started changing by suppling the labour in cheaper quantity of by using the broadband (on which extensive investment were made in pre dot-coms era) this globalisation of product to services also faced the protectionist policy from america and other european countries (restriction in H1-B visas
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Global Value chain : Now the value chain has been globalised, 'right people' are adding value to the chain. One point should always be rembered that Indian companies are providing same services which were previously provided by there american and european counterparts but at the cheaper rates, by outsourcing major chunk to India.
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Slowdown: In case of the slowdown again gaining scale will be difficult and for survival expansion through reducing margins will become crucial and now the protectionist policy of west will take hit as they will forced to open up there supply. Indian companies have very small pie of global IT spending and it is so strategically divided that in event of slowdown the larger portion will be chopped first and it will divided in to Indian players.
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