NIST e-NEWS(Vol 62, Apr 15, 2009)

Winning in the Downturn-5Mr. Ratnakar MishraFaculty, Management Studies(Current slowdown in IT industries prompted many majors to scale down their business and defer themanpower hiring decision. This article intends to add some data to substantiate the facts and apprise thestudents about the downturn and challenges as well as the strategies to win over it)Despite all assurances and help provided by the Government of India to IT industries in the shape of taxcuts and putting forward looking decisions like quick nomination of board members in the recent scamhit IT major, the nose diving performance of some major newsmakers look grim. A sector that was onceknown to withstand all storms and returning robust numbers quarter after quarter is losing its blue moon status.Except Infosys (down by 15% having 70% weightage in IT index, Chelluri, BS.09) all others contributed to a fallof 45% in the BSE IT index.Currently service sector occupies a pivotal role in the Indian Economy by providing 49% share to GDP anddespite the global slowdown in IT & ITES sector, still the opinion is in favor of it as the industrial growth seriouslywent down (3.5% in last quarter) and the agricultural output does not signal to a good revival (2% rise in overalloutput largely due to a rise in Kharif output). Earlier when GDP growth was touching almost 9 %( 2007-08) nowit scales down to 5% (estimated for 2008-09 by CMIE, India) although much higher than 1% growth of worldeconomy. World economy averages 6%, US 5%, European countries average to 6% and Japan growth to 1%in 2009. We are threatened because our 85-90% IT businesses are from these three regions (US, Europe &Japan). The future estimation for these three regions is also bleak and expected to lie between 1 to 2%. So anylayman can well guess about our future prospects. (BS. March 09).Another cause of worry for Indian IT business is the US job cuts and their Government’s call for protecting nativejobs (‘No’ to outsourcing). United States of America lost 36 lakh jobs in last 13 months and their unemploymentrate is now touching 8% (India’s unemployment rate is 25%).In November 2008 USA lost 5,33,000 jobs, 4,00,000 in September and 3,20,000 in October & henceforth theaverage job loss per month is 2,00,000 till Feb 2009 prompting the new President to call for this type of jobprotection.To add to our woes, the US job market is increasingly becoming unkind to all non-white races catapulting theirreturn to the homeland; further worsening the matter inside our country. The US bureau of Labor Statistics inmonth of January 2009 shows as much as 12.6 percent of all black Americans and 9.7 percent of Hispanicsworking in US have lost their jobs since January 2008; a bit higher than the overall job loss by white Americans,i.e., 6.9 percent (BT 2009). In the 3 months the rate of job loss of Asians in their homeland has risen from 3.2percent in October to 6.2 percent in December 08. Although this rate is a bit lower but as a major flow ofmanpower occurs between these two regions, severity in one is bound to offset another.If anybody has any patience to notice the trend of BSE sensex, it is hardly be worth mentioning for him to goahead with such discussions. As per a recent economic survey the projected sensex at December 2009 is 9000-11,000 (responded by 70% of respondents) and in another question about the revival of the market 50%respondent went in favor of ‘more than 3 years’ option. The big IT companies may survive due to their diverseservices, quality control, long clientele as well as good records, but the small & medium companies get all thetrouble by the decreasing IT spends, drop in new projects. Notably the stock valuations of majority companieshave dropped significantly. PE multiplies on a one year forward earnings basis have slipped to single digit ascompared to 15-25 earlier.However in India, still the matters are not that worse unlike the American counterpart. But the link (trading withUS forms 80% of our IT. business) may spell trouble as the source is severely damaged, dampening the hopesoversees and at home as well. (To be continued……………..)National Institute of Science & Technology, Berhampur, 761008 14 of 18