Economy

IT Industry: Will The Bubble Continue To Grow or Will It Burst?

IT Industry: Will the bubble continue to grow or will it burst?

IT industry is the backbone of all the bright spots present in the lifestyles of every Indian citizen. Since 1990s, it has been a great miracle that supported a huge mass of India, and that too, at the time when there was no hope expected from India.  We often hear several speculations about the decline of the It industry in the near future, but the point is; how far are these speculations true?

On-going situation in TCS, Infosys, and other IT companies:

Before preceding any further, let us face the truth, IT business is not a ‘technology’ business, neither is it any sort of miracle going on. The news we often hear about TCS, or Infosys, or any other IT firm, sacking their employees, is one of the proof of it, not being any miracle. With the imminent recession period to happen, the IT companies are bound to do the same. The business of such industries involve hiring of cheap labors from India, contracting it out to other expensive countries, and therefore, pocketing the difference for its own sake. Due to Brexit i.e. Britain leaving the European Union, there is withdrawal of several ongoing projects, which is also hitting these industries seriously. Recently, the CEO of Infosys, Vishal SIkka said in an interview that out of their 1000 clients, only the top 250 produce good revenues.

Why are the financial expectations of IT firms not satisfied?

The main reason behind this is that the IT sectors are not prepared for any sort of change. Everything about using and managing technology is in constant change and often the changes are delivered in sudden shocks. This is the kind of crisis in which any possible solution has to be centered on downsizing. We all are aware of the fact that companies such as TCS and Wipro; they recruit hell lots of freshers every year. The result is that they are not able to meet their own expectations. Also, there are some companies like Accenture that are doing great. They understand the fact that they require smaller number of skilled people, unlike TCS or Wipro, that recruit people in bulk.Similarly, Infosys is approaching the $10 billion mark and hopes to reach $20 billion by 2020. This again, is more of an aspiration because the attrition rate of employees and other external factors make it quite hard to earn significant profits. Infosys also saw a ramp down of clients recently which affected them hugely. Same is the case with TCS and other IT giants too. If there are less clients, the profits will go down too.

What next? Is this the end of IT industry in India?

Well, definitely not. It is not at all the end of the IT industry, as these industries are the back bone of India.  IT sector has come a long and has increased its contribution to India’s GDP from 1.2% in 1998 to 7.5% in 2012. Also, India is considered as a low cost development and it supports all the IT needs. At present India doesn’t do much high end work like those of high level design and architectural design, however this is changing and Indian IT companies are now foraying in these high end design & architectural jobs? This sector will continue to grow and create new jobs which never existed in India before. Due to recession and withdrawal of almost all projects, the walls of the bubble has degraded, but shall not burst in the coming days.

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  1. Pingback: Cyrus Mistry: Man with Surprise Entry And Abrupt Exit - Finance Minutes

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