Tech Live: IT Giants Move From Triple Plus To Triple Minus

It should not surprise long-time watchers that India’s software service companies are facing multiple challenges. No honeymoon lasts forever.

Time was when India had a large pool of educated unemployed and under-employed, and information technology rising up in the 1980s gave a godsend opportunity for them amid a shortage of skills and high growth in Western economies.

From advanced computer science to simple website creation and then back-office work like call centre operations, everything fell into place in the three decades since 1985 or so — when network computing was taking off in a big way.

The arrival of the Internet put the business on steroids. This helped companies like Infosys, Tata Consultancy Services (TCS) and Wipro to enjoy an easy ride — first on cheaper wages, second on stitching up solutions built around them and third in managing efficiencies in large scale “code factories” and “process factories”. Results for the last financial year unveiled by these companies last month have disappointed at least some analysts and/or investors but that is because expectations have been raised over the years.

Wages don’t remain constant, and cheap labour advantages don’t stay forever as economies grow. Similarly, old technologies give way to new, and usually this happens in the direction of automation that reduces the use of labour to maximise productivity. The fault, therefore, may lie in expectations rather than reality. The simple fact is that India’s IT giants have to deal with a situation that is the opposite of the 1980s.

New technology in the form of cloud computing, slowdown or recession in Western economies and rising wages in India have together created a “triple negative” where there used to be a “triple positive.” Solutions are possible to get over this gridlock but this requires a new kind of thinking — and a new churn. I have little doubt that all these companies are going through that.

But, as an old saying goes, “What got you here won’t get you there.”

The uncertainties we are facing is the signalling of the end of one big wave, and the possible start of another. But then, the giants have cash chests, global experience and intricate knowledge. These could make a big difference.