Will Infosys and TCS disappear in 8-10 years? - Views on News from Equitymaster

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Will Infosys and TCS disappear in 8-10 years?

Mar 28, 2012

This thought would hardly ever cross anyone's mind as Infosys or Tata Consultancy Services (TCS) are not just any other company in India. They are Information Technology (IT) giants. They enjoy the reputation of being a bellwether in the Indian software industry. They are the leading players when it comes to grabbing offshoring opportunities in the global arena. In addition to that, most of the industry experts feel that there still exists a great potential for growth in the Indian IT sector. However, recent views given by The Hackett Group, a US-based strategic advisory and research firm, on global offshoring projects an altogether different story.

According to the Hackett Group, offshoring of jobs to India would peak by 2014 and would start declining thereafter. Even worse, in the next eight years, offshoring would reach the end of its lifecycle. The research firm predicts that only half of the existing business services jobs in the developed economies such as the North America and the Europe would be in existence in 2016. That reduction would badly hurt the number of potentially offshorable jobs.

No doubt, all this casts a dark cloud over the expected future growth prospect of Indian IT industry. After all, so far it has thrived on the very concept of outsourcing. That too, most of the growth was witnessed on the back of the developed economies such as the US and the Europe. However, does this projection by the Hackett Group negate the all growth potential of the flourishing Indian IT sector? Certainly not.

To understand why, first let us revisit as to how all outsourcing business from the developed economies started. The root reason is its cost effectiveness. To add to this, there was a lack of sufficient human resources in these countries. All this led to the growth of outsourcing. One can always argue that this is just history. The important question of the day would be "is the situation different now"? Has outsourcing reached its end? Not really.

As a matter of fact the need to increase business efficiency is only growing by the day. The current crisis in the developed economies is forcing companies in those regions to look for cost effective business solutions. And they are unable to get these solutions from within their own countries. There still exists a dearth of the right talent at a cost comparable to that available in India. Hence, global outsourcing potential is here to stay. After all, India still holds the tag of the most popular destination for offshoring.

The buck does not end here. The big companies in the sector have matured. They know that the world around them is fast changing. Hence, they are also trying to move up in the business value chain. They are no longer restricting their business to just US and Europe. They are diversifying across the geographies. They are focusing on the growth potential in the Asian counties as well including India.

To put things in perspective, just take the example of Infosys. The Company has completed 30 years of its journey. Now the company is looking at the next phase of the journey. In the first phase of the journey, Infosys 1.0, the company created GDM (Global Delivery Model) which became the de-facto standard in the industry later on. During Infosys 2.0, the company developed the capabilities of providing end-to-end solutions and consulting services. Now in third phase, the company is focusing on products and platforms business to increase the non-linear business while doing its regular business. Hence, the company is adapting itself with time and creating new growth opportunities while maintaining its relevance to its clients. Similar is the story with the other Indian IT giants.

So, would Indian IT story and the future of companies like Infosys and TCS fizz out in 8-10 years? We definitely do not think so.

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14 Responses to "Will Infosys and TCS disappear in 8-10 years?"

karthik

May 24, 2019

worth of 1 lk invested in infosys as on april 16 2012 would be around 18lks as of date 24.5.2019

Like 

IT watcher

Aug 22, 2014

Yes, these companies have done well so far. But their strategies had been based on cost arbitration . Over the next few this advantage will disappear with the wages on the rise. Further most of their growth is through linear growth, with tens of thousands added to the workforce. This in itself will be hard to sustain unless they move to non linear model of growth. But nothing seems to be coming out from these companies which is earth shaking. They are still pursuing large workforce based multiple year outsourcing contracts and the profit margins under these contracts will be under immense pressure for the aforesaid reasons. But it should be admitted that they have the necessary wherewithal and Human Resources to switch tracks if they have the mind to do. Let us wait and watch before passing the final judgement

Like (2)

Rajput

Mar 22, 2013

One can only hope. It's mind-boggling how they are still able to consistently rip-off global companies for huge amounts of money, delivering incompetence an a lack of ethics by the truck load.

Like (2)

HG Sharma

Apr 15, 2012

The companies which reinvent and adopt themselves constantly , will never die.See their past,how they were and what they are today.As these companies grow they may engulf the big fishes in developed countris.Who thought that Tatas will take oevr Corus!!.Eventually they will provide lead to developed nations. From services they are slowly but surely migratiing to Product development and there will always be need for newer products.

Like (1)

Vijay

Apr 10, 2012

These companies will exist and grow. They may not grow in India if the price advantage is lost. In that event the companies will shift their delivery presence to the lower cost locations even if that location happens to be North America. The game is no longer about countries winning and losing in the global marketplace... its about corporations winning and losing... and in this game there are no borders.

Like (1)

Malcolm Bersohn

Apr 9, 2012

I know China and am certain that Chinese people generally hate to speak in English. They study it but they don't absorb it. For many Indians, in
contrast, English is familiar and belongs to them. I chat with my
Indian colleague in Hyderabad and his English is faster than mine.
Infosys and TCS have a permanent advantage.

Like (2)

sethu

Apr 9, 2012

I think it would happen if not in next 8 years certainly in next 20 years.When so many Big corporations that have been extremely successful in many industries have vanished in thin air.TCS and Infosys are nothing compared to those successful corporations.Think about it..

Like (4)

Dr R Ezhil Arasan

Apr 5, 2012

I am certain that this would not happen at all.These companies have evolved from a mere outsourcing service centers to development to solution development houses while this is still in early phase. There is a tremendous knowledge and talent along with best management processes residing in these majors today. We still have a poor quality non corporate governance which is restrictive. None of these companies would be doing what they are doing today in the next 8 to 10 years but they would be developing large community centric social IT Products(I am a doctor and I believe India and China will not be able to even basic health care to all their people without IT medical application ) and applications managing vast
populations needs than merely addressing business houses. In other words if they can visualize,India and China would become their biggest growth engines with US a minor engine and Rest of World acting as bogies.

Like (1)

MATHUR99

Apr 3, 2012

Well,they may not disappear as such, but definitely the developing economies ,especially, Asian countries will certainly give them a run for their money. The reason is their cost effectiveness given the rising cost of manpower hiring in India which is rising exponentially.This will definitely make them more expensive than most developing economies.Add to that the growing threat from China which is fast catching up with India in proficiancy in the English language which gave us the initial advantage over most non english speaking countries. TCS and Infosys, and other big and not so big Indian software companies ,will have to factor this into account in order to survive in the global market in the coming years.

Like (1)

rk77

Apr 2, 2012

This may be possible as the number of jobs will dwindle with increasing computerization as software that reduces work is further developed. Most of the work done by Indian software 'experts' is low end repetitive work that will not be required with advances in software. It may reach a stage of redundancy and thus, self-destruct.

Like (1)
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