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The new challenges for Indian IT sector - Views on News from Equitymaster
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  • Apr 5, 2011

    The new challenges for Indian IT sector

    The world is flat. But more often than not we tend to forget what goes into flattening the world. When a company decides to go global to expand its business, it faces plenty of obstacles in its way.

    Same is true for Indian IT (Information Technology) firms. In this article, we are going to highlight some of the new challenges that have emerged for the Indian IT companies as they become larger players on the global stage. The challenge lies particularly in terms of the workforce employed by the companies. As they expand their global footprint, companies have to look beyond the borders of India to recruit talent.

    The first major problem that the Indian IT firms have started to face in recent times is that they are now subject to different legal laws and norms. Each country has its own set of rules. For example not recruiting older employees was fine in India. But they can no longer reject people on the grounds of their age. A case in point is the recent lawsuit filed against Infosys, wherein an individual alleged that the company declined employment to him just on the grounds that he was old. While Infosys has reiterated that they do not discriminate on age, however, they were unable to give a plausible reason for rejection. There are many more such cases that Indian IT companies now face as they expand global operations.

    Another major problem that has cropped up is the issue of anti-outsourcing. Indian IT industry has thrived on the work outsourced to them particularly by the developed nations. However, as the developed world faces the brunt of the global crisis, they have started raising their voices against the migration of jobs to India. In recent times, many have imposed stricter visa norms and legal fees. For example, US visa rejection rates for Indian techies have doubled from around 4% to over 8% over the past nine months. As a result, sending IT personnel to onsite locations has become increasingly difficult and expensive for the companies. This would start to have an impact on their margins in times to come.

    Also as Indian IT firms go global they need to develop the optimum mix of employees. A big dilemma that they face is to get the balance correct in terms of recruiting from the local markets or to assign the jobs to Indian counterparts. The decision is critical as the wrong mix could have an adverse impact on employee morale and productivity. It also has a serious impact on the company's operating costs. Companies like Infosys and TCS have been opening offices in countries outside of India. As a result this problem becomes even more magnified for them. Companies like Wipro who rely more on inorganic growth through acquisitions, also face the same problem.

    Hence it is clear that Indian IT companies are facing multi faceted problems. Japanese Auto major Toyota too had to face the same issue when it was expanding its business in USA. Indian IT firms will do well to learn from Toyota, which has effectively dealt with such issues.

    Will there be any material impact of these new challenges on the business of Indian IT firms? Only time can answer this question.



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    4 Responses to "The new challenges for Indian IT sector"

    Shreyash Gupta

    Feb 8, 2017

    Problems faced by I.T industry in India? Point wise plz!



    Apr 6, 2011

    infosys n wipro are just job shop factories which only believe in doing labour work and not intellectual work. they are good in providing employment to large no of people but they cannot generate more than X amount of revenue after some time..
    one needs to look at innovation else IT revolution will meet the same fate as the PSU's which perished due to narrow indian management handling the show..
    "cost cutting is not a solution, its a invitation to disaster.. "

    Like (1)


    Apr 6, 2011

    now everyone has the fear,that in near future,INDIA WILL BE THE RICHEST & POWERFUL COUNTRY IN THE WORLD...........................!

    Like (3)


    Apr 6, 2011

    I feel these are minor issues. The real issues are within. Unlike a toyota, employees in Indian companies are not engaged enough to feel a belongingness. On paper, there are lots of buzzwords and jargon but in practice, all these companies are just exploitative and work for their highest level officers. management is also routinely poor in these companies and there is a factory mentality. Employees are, simply put, not respected and cared for. These are the issues that will cause the downfall of the Indian IT industry.

    Like (2)
    Equitymaster requests your view! Post a comment on "The new challenges for Indian IT sector". Click here!

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