Bad times for Indian IT

Typically, companies in the US outsource their routine maintenance and low end project work to India and keep the really important projects inhouse or work with local vendors here. Most large companies that have offshoring programs have already offshored most of these functions to India. For the remaining companies, if they have not offshored yet in 2007, it is likely for a good reason and I doubt it will happen anytime soon. Even if it does, I feel that the potential increase in business will still not be able to make up for the loss from projects that have shut down due to budget cuts. You will never hear anything like this from the companies or the analysts, who continue to portray a rosy picture and feel that a slowdown will only benefit Indian IT. But, I hear enough news to the contrary and think that companies are preparing themselves for tougher times ahead.

Look at the evidence
IBM fires 700 people.
500 people "voluntarily resigned" from TCS.

I'm sure that there are similar stories being played out elsewhere. I see enough evidence in my own firm. All the managers were called for a meeting last week and informed that the overall utilization was low and a major drive has been launched to fill up the open positions from the bench pool. And yesterday, we learnt that the notice period has been slashed to 1 month. Add to this the fact that promotions, bonus, salary hikes which are typically completed by early January have yet to be announced and it does seem clear that job cuts are on the horizon.

The Indian economic growth story depends a lot more on the IT sector that many people realize. It's the promise of huge salary increases and large disposable income that keeps IT folks spending on a lot of goods and services and leads to a boom in those sectors. So, a slow IT sector is not only bad news for itself, but for many other sectors as well.