Is the Indian IT Industry heading to a Slow Death?

“Gloom in India’s IT sector”

“If you are in your 30’s and in IT, you might loose your job”

“Disappointed earnings stock falls”

“Strong Rupee causing loss in revenue”

“Tighter H1B rules for cheap Indian IT workers”

“Indian IT is Dead!”

The above news articles have made headlines in the leading dailies and have for sure caused unrest amongst the Industry.

Before we take a sneak peak in to the future of this Industry, lets try to go back to the initial days to the plantation of the seed known as IT in India. Also the readers, the authors of the articles and the people working in the Industry should know how it all started.

History of IT in India (reference –  Accidental India by Shankar Aiyar)

Tata Consultancy Services (TCS), was setup in 1968, initially as  the Tata Compute Center to provide services to group companies which later got into exporting software. Patni computers was also an early entrant where Late Narendra Kumar Patni, started experimenting with the offshore model in 1972.  Now as majority of us where not born at that time, the economical and political scenario of India was very different from what we have right now. India did not have the best of relationships with the US, and was considered closer to USSR (Russia of today). The economy was very restricted and there existed a concept of License Raj. If entrepreneurship is considered a risky proposition in today’s time, just imagine how difficult would it have been for Infosys, TCS, Patni, NIIT.  Just for the sake of enlightenment: –

You needed clearance (a five step process) to purchase a computer from the government, which could take 12-18 months, usually by the time the clearance came, the machines were outdated.

In 1983 a 64kbps-leased line would cost Rs. 45 lakh.

In the eighties, 5 out of every 1000 persons had a phone.

The ridiculously high taxes and customs (you had to give 200% of the cost of the machine over 5 years)

You could not open an office abroad

Consultants could not be hired

The exporters had to first bring dollars in India and then from that they could use 50% for travel and maintenance expenses from overseas travels, also a detailed itinerary had to be submitted to RBI

So from a reality check standpoint, the odds were against these few individuals. Poor infrastructure and red-tapism, kept us from becoming the hardware giants like South Korea and Taiwan.

Also a very important point to note was that these companies did face a lot of criticism then as well for the arbitrage based profits but the scarcity of resources, computers, lease and imports meant that doing business “on site” made more sense.

With the opening of the Indian Economy and some aggressive steps by the government, the ball finally started rolling.

From 71 crores worth of software exports in 1987 to more than 100 billion dollar industry (2016/2017), it has come a very long way.

Every year the industry hires thousands of fresh engineers and makes them go through rigorous training to make them competitive at the international level. The workforce is about 10 million in India growing at about 7-8% (FY 2017).

Relationships with the US

It all started with Indira Gandhi and Ronald Reagan’s meeting in Mexico in 1981. At that point in time, India was thought of as the Soviet Stooge in front of the US. Despite the fact that US supported Pakistan and intimidated India in 1971 by sending aircraft carriers, cut off fuel supplies to the Tarapur nuclear plant in 1978 and the shit to mouth food grain policy in 1967, Indira Gandhi had a larger goal in mind. She know that it was in the countries interest as well as the fact that there existed a healthy Indian diaspora in the US.  Rajeev Gandhi continued the relationship with Reagan and both nations prospered.

The H-1B Visa, was created in 1990 by the signing of the Immigration Reform act of 1990 by President George H.W. Bush, it became important for the IT companies around 1999-2000. Suitable growth environments where every company was moving towards technology and systems, these companies became behemoths in the next few years.

In comes Donald Trump

Donald Trump

Donald Trump

With Donald Trump and his administration taking a hard stand on the issuance of H-1B and the companies pretending to the impartial spectators (a concept coined by Adam Smith), the possibility that getting rid of Indian programmers on an H-1B and replacing them with American workers of working having double the salary is right now on the lines of lineocentrism (a concept beautifully discussed by Jordan Ellenberg in his book – How not to be wrong), where statements like 26 people killed in a series of attacks in Israel is equivalent to on a proportional basis of 1200 American deaths make sense.

The Trump Effect is scaring International Students off

Sadly these aren’t just wild opinions that flooded your Television set when Trump came to power, these claims very well have changed themselves to facts, according to a survey to which 76% foreign institutes responded, 40% of them reported a critical decline in the International Student Applications. For the first time especially in USA and Singapore a significant dip was reported in the Student Visa application, this trend has been reported for the first time in 15 years. Meanwhile countries like Canada are still exhibiting a healthy Visa Application rate.

Getting the MOJO back

H-1B issues, Brexits, Australia 457 or an overall sluggish economy, these companies need to introspect and try to remember their forgotten roots. From fighting license raj to the never ending wait for a new outdated computer, they have been through far worse conditions.  Whatever has to happen it has to be swift and for that purpose going lean is inevitable.  The pressure is back and historically its when we start firing all cylinders.

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