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January 20, 2015

To Kill a Golden Goose

Commentary by Srini Vasan 

IT Industry in India is peculiar in one respect - the value of human resource DECLINES as it accumulates experience - totally in contradiction to any brick and mortar industry or business, where usually experience enhances value. 

Reason for this anomaly is that in India, the major focus is on low-level service aspect rather than high-level development. Actually "Techie" "Software Development" etc., are great misnomers in the Indian context, as much of the work involved low-level coding or call-centre operations, which can be carried out even by "low-cost" freshers, after suitable training. 

These fresh recruits from campus interviews- "Worker ants/bees" - form the enormous base of organizational pyramid in any software services company,which makes acute angles towards the summit of the pyramid, numbers falling drastically as it slopes upwards. Reason for this ungainly pyramid formation is again resides in the low-level service focus of most of these so-called "Techie Giants". 

In the initial period the Man Power Productivity figures of employees bring smile to the bosses, given the wide-gap that exists between the revenue earned thru them and the compensation paid to them. But then the smile soon vanishes as the gap narrows down rapidly, due to two factors- 

  1. Ever-rising expectation of employees on "RISE", riding on threat of attrition.  
  2. Cut-throat competition among the service providers within and outside India as well, which is fully exploited by the foreign masters, but naturally, by constant squeeze on hourly rates. 

The IT bossman who is supposed to be a bell-weather of economy, is always under constant pressure to "show" profitability figures to his Board that always have to be an improvement over the past. It used to be Year-On-Year comparisons in the Jurassic age of IT industry-meaning in the 90's- which then "progressed" to Quarter-On-Quarter, Month-On-Month to rest at current ridiculous levels of Week-On-Week! 

No doubt companies do try to take various measures to help them keep pushing their profitability figures higher and higher by trying to "move up the value chain" in their service offerings or by constant focus on "tool development" to improve productivity. But these revenue-improving measures are neither easy nor faster to adopt and they do require serious commitment both in terms of time and money. 

That forces the companies to look at cost cutting. Manpower cost which forms the largest chunk of a software company's operational costs, is the obvious target to attack. And given the very nature of their low-level service business focus, it is easy to manipulate the structure of their operational pyramid by always aiming to keep as large a low-cost base of worker ants as possible, ejecting higher cost resources occupying higher levels of the pyramid. 

Where does that leave the employee who sees himself/herself as victimized? It is the same employee whose entry-level salary is almost double that of his/her counterpart in a brick and mortar industry. And this disparity keeps on increasing exponentially so much so an IT industry employee reaches a salary level in just five years which would take at least twice/thrice the time for a brick and mortar employee. And this is not considering the additional bounty in the form of savings from overseas postings. 

Large scale lay offs are not the only measures of cost-cutting. Wage-freezes and wage decreases are options to be exploited fully before pronouncing the final judgement. But that demands a leadership with vision and long-term focus than just on Week-On-Week figures!
Is Trade Unionism a viable solution to this problem? Definitely not.It would only complicate the problems and take this golden goose sector into an irrevocable state of chaos. 

{sic end of article}

This commentary piece on the current state of affairs of the IT industry in India was noted by Srini Vasan on Facebook in January 2015. This has been reprinted with permission by the author and very few editorial changes to be left as close to the author's elocution as possible. 

Feel free to share your thoughts on this topic in the comments section below. Thank you.

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We help build effective, culturally competent global teams with focus on the cultures of the USA and India. Jennifer Kumar, Managing Director, an American citizen, has almost 10 years experience living, studying and working (owning a business) in India. Authentic Journeys Consultancy is registered as a Private Limited in India (Kerala) and an LLC in the USA (Salt Lake City, Utah). We provide onsite and live-online instructor-led courses, facilitation and corporate coaching.