Software // Information Management
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2/4/2008
10:02 AM
Rajan Chandras
Rajan Chandras
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A Tale of Two Economies

The signs are familiar and worrying: a US economy that cannot seem to rebound, job losses on the rise, and consumers getting increasingly jittery. Will US companies, in a desperate bid to cut costs, intensify their push to send work offshore? Not so fast.

The signs are familiar and worrying: a US economy that cannot seem to rebound, job losses on the rise, and consumers getting increasingly jittery. Will US companies, in a desperate bid to cut costs, intensify their push to send work offshore? Not so fast.

As I land in India's economic capital Mumbai (erstwhile Bombay) on a work and personal trip, headlines in The Economic Times - India's answer to The Wall Street Journal - present a contradictory picture about the opportunities for the Indian offshore industry. Here are some representative news items.• US recession could be good news for Indian IT firms: Narayan Murthy, Infosys Founder and Chief Mentor says, "The fact that there may be a slowdown in the US means people will become much more concerned over better value for money... we could look at it as an opportunity."

• TCS cuts salaries: India's largest software exporter TCS plans a 1.5 percent cut in salaries of its over one lakh [100,000] employees in the fourth quarter, as it fell short of certain financial targets. Not coincidentally, the Indian Rupee has appreciated about 14 percent against the US Dollar in the last one year.

• Wipro to hire more freshers: Continuing with its focus on recruiting more new graduates, Wipro has given out job offer letters to 14,000 rookies from engineering colleges for FY09.

• IBM dismisses 700 freshers in India. 700 entry-level trainee programmers across major IBM offices in India were asked to go based on their performance in aptitude tests.

There is no doubt that US businesses will be under great pressure to cut cost and send more work offshore. Unfortunately, the weak US dollar is not cooperative;it is buying less services than ever and, in turn, the weak dollar and resulting strong local currencies are squeezing profit margins - and hence pricing flexibility - for offshore vendors.

US business and offshore vendors will both survive these rough times, but I think America's domestic outsourcers and IT workers stand to gain the most, with a real opportunity to narrow the gap with offshore competition. It's a little too early to celebrate, but perhaps there's a trend in the making.The signs are familiar and worrying: a US economy that cannot seem to rebound, job losses on the rise, and consumers getting increasingly jittery. Will US companies, in a desperate bid to cut costs, intensify their push to send work offshore? Not so fast.

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