Recession…

By far, ‘Recession’ has been the most spoken of word in the year 2009. With American corporate giants closing down, such as Layman Brothers, global economy has slowed down drastically causing mass unemployment, markets to crash and prices falling. This fall, as expected, in turn affected other industries and fields of life, just as a stone thrown in a lake that causes ripples in all directions. But my concern is what the actual effects of this so called recession are? In what ways is India affected? What have the IT organizations planned for this scenario?

With the closure of some of the American companies, other organizations that are indirectly related to them have also been affected and hence some of the generic counter actions implemented is cost cutting, resource management and optimum utilization. Over a drill down analysis and discussion, we would find that all these 3 are very closely interrelated. From an IT perspective, these terms have led companies to bring down billing and drive quality service at less expense. From sources, I hear that most of the projects of American origin have faced some serious back-outs in all India based multinational IT firm. Some projects have removed resources, some have been partly closed and even some have been shut down. Accepted that these factors have ended up in people losing jobs and for the remaining who are employed, has created wide spread tension and a sense of insecurity. I remember reading an article sometime in January which said that prices of 2^nd hand cars dropped by 30% after recession hit Bangalore.

On the other front, I believe that the entire recession scenario has been hyped up by all IT companies beyond actual reality, for their own benefit. Wondering how…? Let’s discuss…Fact is that recession has hit India very delicately and is not as adverse as what happened in the US. In spite of recession, IT firms make profits in billions of rupees. The YOY and quarterly profits are just as high as usual with a marginal difference of 8% on the figures. Probably instead of making $ 40 million profit they may be making $ 35 million. More over the price of dollar which was Rs.42 before recession, has now stepped up to Rs.50. This further neutralizes the effect of lesser billing to the client, since all companies carry on their funds conversion with $ as base. In such a case, why are employees not give proper salary hikes? Employee facilities/ perks have been made more stringent in most cases. In some cases they have been removed completely in a pretext to maintain profit margins. The companies giving a minimal salary rise also adds to their profit. Most of my readers being from IT sector, I’m sure all would agree to the fact that ‘recession’ has been used to over-load employees with more work but still paying less salary. All corporate companies use the recession scene as a shield to avoid answering these questions.

It actually turns out to be a tragic triangle- the clients are protecting themselves from damage, the companies are protecting themselves from damage but the employees are the ones to get affected as don’t have any way out. I strongly believe that the employment regulations and policies of our country need to be reviewed and revised. Special attention has to be given to employees from IT and associated sectors as they are by far the most affected from these IT firms. In spite of the huge profits, companies still try to minimize expense on employee as less as possible. While the work done by the employee is expected to be error free and of the highest quality, the facilities and the benefits given to the employee from these companies remain to be of very poor standards. This situation is however applicable only to India based IT firms and not to companies from other countries which have one of their offices in India.

Perhaps this would also be the best time for India based IT companies to start thinking more towards their own IT products rather than the support and service. As per latest data more than 65% of profits are drawn from IT Infrastructure based and other support functions. This huge component is by far the most susceptible to the recession scene. The remaining 35% figure is towards development and other ancillary fields. It’s high time for Indian govt. as well to start investing and encouraging other industries, some of which have long been neglected. We can put more thought into marketing, manufacturing, health care, tourism etc. Innovation now may prove to be the final key and the engine for growth which would help boost India and give us the edge over other countries, when the next boom occurs.