Recession and Impact on Indian IT


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Impact of Recession on Indian It Market

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Recession and Impact on Indian IT

  1. 1. A Recession is a contraction phase of the business cycle. National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession. The financial press often uses the recessionary definition of two or more consecutive quarters of declining Gross Domestic Product (GDP). GDP is defined as the total market value of all final goods and services produced within the country in a given period of time.
  3. 3. A slowdown in the US economy is bad news for India. • Indian companies have major outsourcing deals from the US. • India's exports to the US have also grown substantially over the years. • Indian IT companies with big tickets deals in the US would see their profit margins shrinking. The whole of Asia would be hit by a recession as it depends on the US economy. Asia is yet to totally decouple itself (or be independent) from the rest of the world, say experts. Outsourcing market is suffering from the recession in whole world and India IT sector is highly dependent on outsourcing mainly 60% on US.
  4. 4. Role Switzerland USA Canada UK Ireland Greece INDIA Project $ 74,000 $ 54,000 $ 39,000 $ 39,000 $ 43,000 $ 24,000 $ 23,000 Leader Business $ 74,000 $ 38,000 $ 36,000 $ 37,000 $ 36,000 $ 28,000 $ 21,000 Analyst Systems $ 74,000 $ 48,000 $ 32,000 $ 34,000 $ 36,000 $ 15,000 $ 14,000 Analyst Test $ 59,000 $ 47,000 $ 25,000 $ 24,000 - $ 13,000 $ 8,000 Engineer Network $ 67,000 $ 49,000 $ 32,000 $ 31,000 $ 26,000 $ 15,000 $ 14,000 Analyst/ Designer
  5. 5. • Peoples are thinking that recession is becoming a disaster for the Indian economy but in my believe recession is actually a great time to start a new venture. • Great time to take advantage of the lack, when talent is available, resources are cheaper. • Fact whenever there is a lack people outsource more. • Western companies started viewing India as good place to outsource big research work, website development, designing work etc. • Long-term market then they can say when the recession in the US financial market come down, Indian IT and BPO/ KPO companies will be in good position to get more outsource projects from the US companies. • Recently Indian outsourcing software and web development industry have started a new strategy to compete with recession by keeping their expenses as such and higher the working time of the staff, higher the quality of out put and reduce the out put time. •Eg:- Apex Decisions (Pilot Project Strategy)
  6. 6. IT industries are confronting heavy loss due to the fall down of global economy. • One danger meanwhile is of a dip in the employment market. There is already anecdotal • evidence of this in the IT and financial sectors, and reports of quiet downsizing in many other fields as companies cut costs. Eg:- BPO Sector $11 Billion Sector -> Projected to cut 2.5 lakhs starting first quarter • 2009. Nasscom(7,00,000 Jobs) • IT Companies are predicted a drop of 15% in growth from 30% last year in BPO Sector •
  7. 7. More than the downsizing itself, which may not involve large numbers, what this implies is a significant drop in new hiring -- and that will change the complexion of the job market. Many companies has laid off their staffs, the number of tourists inflow to india has come down, companies have cut down compensations and perks etc, government and other private companies are reluctant in starting new ventures and starting new projects etc. IT Projects that are halfway to completion, or companies that are stuck with cash flow issues on businesses that are yet to reach break even, will run out of cash.
  8. 8. Opportunities for Indian IT due to US recession US recession may be a boon for Indian offshore software companies The impact of recession is higher to small and medium sized (SMEs) enterprises whose bottom lines get squeezed due to lack of spending by consumers SMEs in the US are under severe pressure to increase profitability and business margins to survive. This will force them to outsource and even have M&A arrangements with Indian firms. India is going to be a great beneficiary of this trend which will minimize the impact of the US recession on Indian industry By March 2008, India had received SME outsourcing deals worth $7 billion from the US as against $6.2 billion in the previous year. Eg. (Satyam got 15 new Outsourcing Projects)
  9. 9. Corrective Steps taken to Check Recession
  10. 10. CONCLUSION In the IT sector, there should be correction in salary offerings rather than job cutting. Taxes including excise duty and custom duty should be reduced to lighten the adverse effect of economic crunch on various industries. IT Industry has been largely hit by Recession , resulting in Lay-Offs. But people with skill set are required in the Industry. Layoffs in Technical Sector need not be a doom and gloom. They could actually boost innovation as laid-off engineers , scientists and other skilled individuals decide to pursue their own ideas. Calling it “ forced” entrepreneurship. Come out with Innovative Strategies for CRM
  11. 11. THANK YOU Here’s wishing you a safe voyage as we ride the waves of this recession....