Who has the time to innovate ? (or the story of a spoilt IT industry)
The Indian IT industry is one spoilt industry. An experienced and successful entrepreneur once commented to me that for an industry to grow at a healthy pace, an unemployment rate of higher than 7-8% is needed. I think it makes a lot of sense. In the IT industry today, with manpower being scarce, the focus is merely on retention, hiring policies and compensation. While that does not mean that the industry is not growing at a scorching pace, it does mean that as a group, we are focused on the wrong issues.
Being a service focused industry, the dependence on manpower is inevitable. As such, I think it is a good thing because it generates employment, improves lifestyle and overall helps in GDP growth. But I absolutely despise the fact that the biggest "challenge" that the industry faces is a employee retention. So much time, effort, energy and money is spent on just one aspect of business that we are losing focus of the bigger picture. This trend is especially harmful for the fresh and young graduates who have just joined the industry or have been here for only a few years. Constantly pampered and hailed as the country's saviors, these young IT professionals live with a false sense of security. They start at salaries at which people in other industries retire, switch jobs every few months and in general lead the good life.
While this appears to be a win-win situation for both the workforce and the organization, it unfortunately prepares neither for the long haul. With organizations constantly focused on retaining and hiring employees "at all costs", our price competitiveness in the services industry is bound to suffer. Average salary hikes in the IT industry are in the range of 12-15%. If profit margins have been traditionally pegged at around 30% and billing rates are only going down, its easy to see how this current model is unsustainable in the long run. The answer of course is to move up the value chain, provide higher quality services and innovate. But with most organizations spending all their energy in maintaining headcount, where is the time to strategize and move up the value chain?
The IT workforce is actually getting an even worse deal. Switching jobs usually means a 20%+ rise in salary. Hence, on an average, an IT worker spends less than 2 years at one organization. Consequently, we have a large pool of inexperienced yet expensive workforce. This in turn ill equips IT organizations in India to move up the value chain since the workforce isn't stable and doesn't have enough expertise to add more value in a cost effective way.
The situation doesn't appear grim today because the world economy has been largely on an upswing for the past few years. So there has been enough business for IT companies to grow and thrive in spite of mounting costs and increasing difficulties in retaining employees. The media also paints a rosy picture and loves to glorify the Indian IT story. However, the big question is how well prepared are we for a downturn in economy? Are Indian IT companies prepared to handle an economic slowdown? More importantly, is our IT workforce equipped to face tough times? Are our young Turks taking their profession seriously enough? Are they spending more time on honing their skills and learning the ropes or are they only fretting over pay packages and job interviews? Do they have the maturity to prepare for future market correction?
Only time will tell but till then sorry, we don't have time to innovate!
Comments
I guess companies change when they are forced to. When there is a downturn, they will be forced to get leaner and more innovative. Those that manage it will survive, and those that dont.. ;)
Posted by: Siddhi | August 30, 2007 06:56 PM
A couple of months into my first job and I myself was thinking on the same lines...certainly I had not imagined the implications on such a large scale as you have mentioned (and about which I mostly agree).
Actually I was more worried on an individual basis. I used to wonder what good people are doing to their career by changing jobs every year or six months. After a period of time you would have probably increased your salary by almost 100% just by switching jobs...but what then? A couple of years of such "tactics" and you would be sort of jack of all trades and master of none!
I think you have a very good point here and have put it across in a superb way.
Posted by: Aayush Puri | August 30, 2007 08:00 PM
Gaurav:
See what a couple of years of running a company does to you? You sound like a wise or rather, wisened, old man.
Posted by: Sarat | August 31, 2007 11:05 PM
I agree with most of the points made in this post but I think IT workers are being given a larger share of blame for not having vision than they deserve. It rather starts top down i.e. the industrial houses of India (TCS, Birlasoft, TechMahindra, Wipro, Anil Ambani/social networking and Parsvnath builder into Telecom :) ) who venture into any business without any passion or commitment whatsoever. They'd go back to selling oil or toothpaste or vegetables if margins in IT fall below 30% or 20% in BPO. If greed begins at top level, then why blame a middle-class 20 something who is trying to squeeze out more money while the going is good. I would sound odd but it makes more strategic sense for a below average or average IT/ITES worker to milk as much as he or she can.
Did anyone wonder what happened to medical transcription offshoring business that was booming few years ago?? today it's animation or testing or call centers or simple ADM which is down below $20 per hour or KPO LPO PPO or whatever u call it...who has seen tomorrow.
Posted by: Ashutosh | September 1, 2007 08:56 PM
Dear Gaurav,
I have been a long time reader of your blogs. I find them quite interesting.
I had earlier read your rants about the IT "service industry" and why we need to have "product companies". Then i think there was a blog which said you were fine with both.
Again there is kind of bashing of the IT industry, on the ground of not being innovative.
Just out of curiosity, i wanted to know, a few things:
1. Do you consider yourself(Tekriti) to be part of India IT industry?
2. What exactly do you mean by innovations?
3. In what way is tekriti innovating?
I am in no way trying to question what you have said. Just wanted to get a little perspective.
Look forward to your response.
Keep Blogging
Posted by: Arpit | September 3, 2007 05:25 AM
Great post, and am totally pro product companies rather than service ones(maybe that's because I am working in a startup), but there's a slight hitch.
If only entrepreneurs could align organizational goals with individual ones and make their employees equally passionate, would you see an innovation trend. Or else the job security, brand value and the more than decent pay will continue to draw freshers to the big service providers.
I can say this with considerable confidence coz I have a great time at work and sincerely believe in the startup motto:
Lets kick some ass...
Posted by: Shyam Kumar | September 10, 2007 07:57 PM
Great post, and am totally pro product companies rather than service ones(maybe that's because I am working in a startup), but there's a slight hitch.
If only entrepreneurs could align organizational goals with individual ones and make their employees equally passionate, would you see an innovation trend. Or else the job security, brand value and the more than decent pay will continue to draw freshers to the big service providers.
I can say this with considerable confidence coz I have a great time at work and sincerely believe in the startup motto:
Lets kick some ass...
Posted by: Shyam Kumar | September 10, 2007 07:57 PM
Salaries are a function of supply and demand in the market.
My views: http://desidev.blogspot.com/2007/09/indian-salaries.html
Posted by: Desi Developer | September 18, 2007 08:58 AM
Very true Gaurav, Right now the IT crowd is pampered a lot and most of them have become complacent.
Warren Buffet has said this about Investors in the Stock market:
"It's only when the tide goes out that you learn who's been swimming naked."
This applies to the Indian IT crowd too. For long we've been riding a high tide.
Having said that, because of IT there is a substantial pool of people who have gained expertise in international business and will prove to an asset for Indian industry.
Posted by: Abhinav | September 24, 2007 07:36 PM