Wednesday, April 16, 2008

Is Indian IT Industry a Maturing or Declining industry?

Apologies for calling IT as an industry, and let me restrict it to this discussion. Since a month or two, I have been observing that Indian IT companies are focused on reducing costs left and right, to sustain the profitability that they have been maintaining since few years now. With reducing dollar, uncertain financial services industry, increasing cost competition from large MNC's, its certainly not an intelligent guess to presume that the profitability will be maintained. Further, Indian IT is no more a darling to the Stock Markets.

Interestingly, I was reading a strategy related article written by some HBS grad about Maturing and Declining industry. It is in the declining industry that one will "harvest" and generate maximum cash flows from the business, in contrast to, maturing industry where it makes rational for a company to chose either to be a cost leader or differentiator. My observation is that most of the Indian IT companies are trying to be cost leaders rather than differentiators. And the approach is same across the company, rather than a differing strategy for each territory they work towards. I believe that a different strategy for a different territory will work better than having a common strategy across. USA and UK are pretty much maturing industries for outsourcing and offshoring, where as rest of Europe, Middle East and AsiaPac are still emerging industries. I would bet my money on a company which treats each market as different and act accordingly rather than reducing costs left and right across.