End for Indian outsourcers - or a chance for rebirth?
“CARNAGE in Indian IT,” read the headlines in India about job losses in its out-sourcing industry as markets stagnate and US visa restrictions erode profits.
The Indian information technology industry generates US$150 billion (RM675 billion) in revenue but is facing an existential crisis largely of its own making because it became complacent and over-confident even as technologies and markets changed.
It can survive only if it exits the business that brought it success and reinvents itself.
India’s outsourcing boomed in the late 1990s run-up to the Y2K crisis because there was an urgency in updating corporate IT systems to fix a bug dealing with the difficulty some computers might have had with dates beyond Dec 31, 1999. Once chief information officers became comfortable with having their systems maintained from across the globe, they started outsourcing large-scale projects to Indian companies, and billiondollar contracts were announced almost every week.
But with the advent of tablet computers, smartphones and their applications in the 2010s, users gained access to better technology than the companies’ IT departments could provide.
They could download cheap, elegant and powerful apps to their mobile devices that made their corporate systems look primitive. Via cloud computing, companies such as Amazon.com, Microsoft and Google began to take over the functions of data centres.
(Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.) So CIOs lost power, and the importance of outsourcers declined. The billion-dollar out-sourcing contracts evaporated.
Modern-day applications also do not require large teams of engineers doing software development: They are user customisable and can be built by anyone with basic programming skills. To offer more value, the out-sourcers worked to reduce costs by improving back-end processes.
They offered low-cost offshore development and cheap labour in the United States, and this fomented a backlash by displaced workers.
The same technology advances that decimated the Indian advantage offer a new opportunity that could allow the Indian IT sector to reinvent itself and even gain the support of Americans who have been rallying against it.
The opportunity is to help United States modernise its aging infrastructure and enable it to bring manufacturing back from China. —WP-Bloomberg
It can survive only if it exits the business that brought it success and reinvents itself.