What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
Any ideas!
Friday, September 5, 2008
The reversal of IT Offshoring - How far is it?
How far is the reversal of offshoring witnessed by IT companies?
That question may probably be answered by looking at why companies actually chose to offshore:
1. Labour cost arbitrage in other words low wages
2. Currency arbitrage - Appreciation of US dollars against developing economies
3. Flexibility of resources - For example Loose labor policies & its enforcement allowing companies to exploit Indian labour (Imagine overtime in Indian IT services need not be paid). Working in odd hours to make few extra bucks!
4. Availability of Talent - Tricky bit lets defer this for later
5. Scalability of workforce - Ability to quickly ramp-up resource. Another tricky one which we can defer to later
Some of the above conditions may not hold for too long.
1. The wage inflation in developing countries are faster than that of developed world. For example the wage inflation in Brazil, China and India are in the range of 21%, 19% and 33% in last 5 years as per EIU
2. Currency have been artificailly maintained at pegged level, we had seen enough debates of this between China and US. India is not a open market....How many times have we seen RBI intervention in the currency market to manage the float of rupee against the dollar.
3. Labor in developing can no longer be taken for granted...Gen X & Y dont want to work overtime anylonger and defintely cannot tolerate working in graveyard shift...
4. Availability and Scalability are tricky bits....i'll not address this...but they are more perception then reality...Imagine tomorrow technology innovation eliminates a need for huge labour skills!
How long before we can see the trend reversing...it is a worhtwhile study by looking at the above factors. India today is 1/3rd cheaper then the wages in US...so we can do a simple math to arrive at the number of years 11. Now we've not even included the predictions of exchange rate.
What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
This is an interesting topic in itself...we'll try and deal with it in another Post...
That question may probably be answered by looking at why companies actually chose to offshore:
1. Labour cost arbitrage in other words low wages
2. Currency arbitrage - Appreciation of US dollars against developing economies
3. Flexibility of resources - For example Loose labor policies & its enforcement allowing companies to exploit Indian labour (Imagine overtime in Indian IT services need not be paid). Working in odd hours to make few extra bucks!
4. Availability of Talent - Tricky bit lets defer this for later
5. Scalability of workforce - Ability to quickly ramp-up resource. Another tricky one which we can defer to later
Some of the above conditions may not hold for too long.
1. The wage inflation in developing countries are faster than that of developed world. For example the wage inflation in Brazil, China and India are in the range of 21%, 19% and 33% in last 5 years as per EIU
2. Currency have been artificailly maintained at pegged level, we had seen enough debates of this between China and US. India is not a open market....How many times have we seen RBI intervention in the currency market to manage the float of rupee against the dollar.
3. Labor in developing can no longer be taken for granted...Gen X & Y dont want to work overtime anylonger and defintely cannot tolerate working in graveyard shift...
4. Availability and Scalability are tricky bits....i'll not address this...but they are more perception then reality...Imagine tomorrow technology innovation eliminates a need for huge labour skills!
How long before we can see the trend reversing...it is a worhtwhile study by looking at the above factors. India today is 1/3rd cheaper then the wages in US...so we can do a simple math to arrive at the number of years 11. Now we've not even included the predictions of exchange rate.
What can the Indian IT Industry do to ensure that we dont loose our jobs when we become less competetive (assuming the technology innovation are not mature enough to eliminate the need for significant labour)?
This is an interesting topic in itself...we'll try and deal with it in another Post...
Thursday, September 4, 2008
Exploiting the Market gap through innovation
Interesting interview from Charles Geschke on his life at Adobe....http://knowledge.wharton.upenn.edu/article.cfm?articleid=2038
Amazing to know that this 4th largest IT products company was the first to pioneer freeware with Adobe much before the Linux of the world. Charles cites of how Microsoft has bullied its way into the market by cloning someones innovation on Excel, Word, PPTs and so on and did so well for itself. He also mentions how the company belts out new products so frequently into the market and monetizes it. The simple rule he says is by exploiting the market gap i.e. identify a unmet need in the market, and launch a product to get 100% of market share....
But honestly, how does one spot such market gaps and exploit them for economic profit in an increasingly complex world! Lets look at what structured approached we have to uncover potent unmet needs:
1. Marketing research - which companies in CPG industries: P&G, Unilever, etc. constantly exploit
2. Proximity to customer by eliminating channels - which company like Dell has exploited so well...
Or a sheer gut feel and intuition!!!! or reading "Blue Ocean Strategy"!
Amazing to know that this 4th largest IT products company was the first to pioneer freeware with Adobe much before the Linux of the world. Charles cites of how Microsoft has bullied its way into the market by cloning someones innovation on Excel, Word, PPTs and so on and did so well for itself. He also mentions how the company belts out new products so frequently into the market and monetizes it. The simple rule he says is by exploiting the market gap i.e. identify a unmet need in the market, and launch a product to get 100% of market share....
But honestly, how does one spot such market gaps and exploit them for economic profit in an increasingly complex world! Lets look at what structured approached we have to uncover potent unmet needs:
1. Marketing research - which companies in CPG industries: P&G, Unilever, etc. constantly exploit
2. Proximity to customer by eliminating channels - which company like Dell has exploited so well...
Or a sheer gut feel and intuition!!!! or reading "Blue Ocean Strategy"!
Subscribe to:
Posts (Atom)
