Is this Why US Recession Hit the Indian IT industry?

Great economists will always say that education, food and medical industry can never be hurt by any recession. If you dig deep you would find that these are the industries where over consumption can never happen and also, these being a bare necessity can never be compromised irrespective of financial abilities.

So what about the other industries? Are we over consuming them? Can we over consume ERP software or a website design? Yes. And if the following story is to be believed some Big companies are already doing it.

Rahul Agarwal (name changed) was working with an Internationally reputed IT firm in Mumbai. This was his first job. He was assigned a project for this US media giant. It was a content management system for them. He believed an SRS document is where you start your project from but instead he was given a working software made in Java and was asked to replicate it using .NET technology. He did not question much and did what he was told to. With a team of 3 they completed the project in around 4 months. A month later they were asked to make a video uploader plug-in for the same CMS. The plug-in was developed on time and delivered but it did not work on the clients system. They checked it thoroughly on their end and everything was fine. After few follow ups they sent a member of the team on client’s site. They found the problem. The base CMS was not installed properly. Some important system files were missing, without which the system would have never worked. In fact, they also found that the CMS was never used or even tested by the client. Only when they received the plug-in, one of the new employees at the clients team wanted to play around with it and reported the error.

Why did it all happen? Well this is what Rahul got to know through his senior.

In US, most established companies have an IT budget. This IT budget is huge(until recession), usually more than what is required, set to satisfy ego and beat the competitor in numbers. The person in-charge of the budget has to spend it (err, utilise it) within the stipulated time. No one bothers to dig deep in what he spends or how effectively he spends but if he is unable to spend it, his job is questioned. So this in-charge first got the (not needed)system developed in Java. On being advised by the account manager (from the IT company) got it changed to .Net and then added a costly plugin to it. Everyone involved makes a personal cut in the whole transaction so nobody questions it (and we believed only the Indian government had corruption problem).

When the inflow of money was low for the media company the IT budgets were cut down (because even the competitor did that. Herd mentality!) ¬†and hence we saw the US recession hit Indian IT companies as well. If the Indian companies were solving only a problem or making something that would increase efficiency or add value of any kind this would have never happened. They wouldn’t have been hit by recession but also there wouldn’t have been any IT boom in India. It has become a norm in US to outsource IT work to India, the lowest bidder wins the contract irrespective of what value he adds.

After knowing this Rahul only waited for his minimum service period bond to expire. He now runs an IT services startup in Guwahati, along with his school time friend who quit Infosys, and makes more than double of his last salary. He is satisfied with the work and makes sure every program made finds a user (and not only a buyer).

I don’t know to what extent the IT budget thing is true but here are 3 lessons to learn from it:

  1. Over consumption has to halt some day. In the long run its better to design for nails that need to be hammered than ones ready to be hammered.
  2. Too much resources can spoil you. Startups, let not the money saving habbit get lost after funding. Rather have a huge party budget than an unneeded IT budget.
  3. For a programmer, code is like a poetry, and a poet certainly doesn’t like obscurity. So next time when you ask your programmer to build something, let him know why no one read his last poem.

It was not a stable economy that was hit by recession, just an over consumption that got normal. Your views?

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[Naman is a startup enthusiast and has worked with couple of Indian startups as Product Manager. He is the founder of FindYogi]

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