What makes the Indian IT industry resilient

The resilience of the Indian information technology (IT) industry is truly amazing. In January 2017, immediately after the introduction of the H-1B Bill in the US House of Representatives, five top Indian IT companies lost over $5 billion in market capitalisation in a single trading session.

From that position, where market capitalisation of Indian IT stocks crashed in the stock market, to April 23, 2018, when Tata Consultancy Services (TCS) crossed $100 billion in market capitalisation and emerged as India’s most valuable company, it has been a truly roller coaster journey. In the process, TCS became the first Indian listed company to cross the $100 billion threshold. So, what makes the Indian IT industry so resilient and capable of weathering storms in the market?

Interestingly, the ability to thrive in Indian conditions makes Indian companies capable of thriving in any condition, literally. The fact is, Indian markets are very unforgiving. Competition in any industry in India is intense and the IT industry is no exception. With so much pressure in surviving here, the challenges you encounter in other markets pale into insignificance.

It is no secret that the billing rate for IT professionals in India is way lower than what the same professional would command for identical work in developed countries. Similarly, the facilities available to an average IT employee are also lower than what is available to his or her counterpart in developed countries. In addition, Indian IT professionals work much longer hours than their counterparts in developed countries do. All of this instils a strong survival instinct in IT professionals that also permeates at an organisational level.

When it comes to knowledge and skills, Indian IT professionals are second to none. This is where the advantage comes in and reinforces its competitive strengths. Alongside this, the ability to use sub-optimal resources to generate first-rate output comes naturally to this industry.

When it comes to cutting edge technology and innovation in service delivery, Indian IT companies tend to excel. Add to this, the veritable one-stop shop that these companies have become in providing resources for literally any type of technology, it’s no surprise that the demand for their services continues unabated.

If you look at it from another perspective, IT business today is truly global. A programmer sitting in India could be working with a development team in Budapest to create an application that will be deployed in the US. This calls for an ability to work with multicultural cross-functional teams.

This comes naturally to Indians. With over 22 languages and 750 dialects spoken in India, diversity is embedded in every facet of Indian life. When you are used to managing and living with so much diversity, the nuances of languages of other countries does not pose many problems. Besides, the English language, as the language of business worldwide, gives Indian programmers an edge.

The IT industry is a knowledge and skill-driven industry that calls for the availability of skilled professionals to anchor and sustain growth. From an availability standpoint, the number of engineers that pass out of Indian engineering colleges far exceed those that pass out of US engineering colleges. This is despite the fact that the size of the US economy is many times the size of the Indian economy. So, a constant stream of professionals suited to this industry is never in question.

IT companies in India operate under far more uncertainty than IT companies in the US do. Government rules and regulations are way more complex and time consuming to comply with than in the US. Unfortunately, the complexity is not because these laws and regulations are very sophisticated but because a lot of these laws are archaic and sometimes out of context.

The recent introduction of GST has simplified indirect taxes considerably and made it uniform across the country, but this alone is not enough. There is a lot more that needs to be done to simplify the business environment in the country.

Cultivating survival skills

The experience of working in an environment that is not optimised for business is a learning one and equips these companies with high-end survival skills. It also instils a spirit of innovation in these companies that makes them very adaptable and resilient.

All this comes in very handy when there are significant issues, like a recession in developed markets or visa restrictions. When faced with issues like these, Indian IT companies show remarkable adaptability to the changing business scenario and an enhanced ability to deal with conditions adverse to business.

The ability to go after and win large deals that assure revenue and profits across multiple years also anchors Indian IT companies’ ability to weather adverse market conditions. For instance, TCS announced four large deals — Rolls Royce, Nielsen, Marks & Spencer and Transamerica at the beginning of 2018. The Transamerica deal alone is worth over $2 billion. Other IT companies in India have also followed a similar path.

Large deals spanning multiple years provide a safety cushion to IT companies and give them some visibility of assured revenues across years to come.

Indian IT companies have adapted completely to the changing situation in the US market, which happens to be their biggest market. This is particularly true for the challenge of managing H1-B visa restrictions that made it difficult for them to deliver their services in the US effectively.

As Indian IT companies are expanding their workforces in the US and stepping up operations there, the power of this industry is evident. Along with it is its unquestioned ability to weather storms and emerge stronger!

(The writer is a New Delhi-based consultant)