Monday, April 17, 2006

Indian IT Industry: The Price Advantage

A significant part of growth witnessed by Indian IT industry is driven by its ability to deliver technology solutions at a competitive price. An educated, english speaking workforce that can seamlessly integrate with the Services economy of the western world, provides the incentive for shift in economic activities to India.

Educated and skilled workforce available at a fraction of costs in the West is at the core of this growth.

Is this advantage slowly diminishing? Factor the following:
  1. Entry level salaries for Engineers/ MBAs and other skilled individuals are experiencing a sharp increase.
  2. Annual increments at all levels (and more importantly at the junior levels) is experiencing a 30% jump per annum

Competetion amongst employers to recruit and retain the best talent is one of the reasons for the unprecedented rise in compensation. Overall improvement in the economy has fueled an easier availability of credit, new houses, automobiles; and with that an ambition level to posses these, much earlier in life than in case of earlier generation of Indians.

The above (more visible) signs of increase in employee cost along with a definite pressure on price realization in an increasingly competitive market is worrying the Indian IT fraternity. And the worries will be compunded if we look in to the minds of this new age' Knowledge Worker.'

Slowly but surely, the Indian knowledge workers (especially the ones working with Indian operations of Multinational companies and export oriented Indian companies) have started looking at the value that they deliver to their parent organization's bottomline. They have seen and experienced that in terms of competency and delivery, they are at the same level as (if not better than) their peers in the west. There is a painful realization at an individual level of the disparity in compensation between the Indian workers and their peers in the west. And very naturally, this is a ready fuel for an ambition in compensation growth.

While at an individual level, this though process may be seen as reflection of 'The new found self esteem'; is it going to weaken the very premise of 'Shift in economic activity' from the west?

posted by Unknown @ 4:57 PM 2 comments

Selling Proprietary Software in Asia

Proprietary Software business over the years has matured markets such as North America and Western Europe. A number of IP driven products and solutions have helped create enterprises (big as well as small). These businesses and products have been able to provide tremendous value to their customers; and in return have created a fortune for themselves.

In their bid to expand the market for their products, many businesses are looking at Asia. Either adapting their existing products to this market or even developing new products focused on the Asian market.
These companies face following obstacles:
  1. Asia is not one large market; it is a sum total of many markets that are fundamentally different from one another.
  2. Software IP and thus the concept of price that is linked to the value delivered is a difficult concept to sell in this part of the world. The markets are still tuned to think of software price as 'Development Cost +'
  3. The need as well as the demand is for top of the line technology at less than affordable price

Marketers often struggle to come to terms with the above phenomenon; and most of them give up their efforts on the Asian market.

Does this market hold promise for Western proprietary software companies? Or is this a readymade opportunity for local companies?

The local companies probably face dilemma of a different type:

  1. They have so far gained expertise in running successful development operations for western multinational... Mostly software companies.
  2. Their processes are tuned to deliver value to software companies; they have a long way to go before they are able to construct and manage the entire value chain needed to service an end customer who is not a software company.
  3. They also lack the marketing muscle needed to become successful in software products market

This probably provides an ideal opportunity for collaborative efforts.

posted by Unknown @ 4:47 PM 0 comments