Pathfinders for IT Industry

The current economic situation has hit the IT industry right on its face. IT spending in most of the sectors has got affected. Industries across all sectors have started tightening their annual IT budget.The dynamics of IT industry has completely changed. The focus now is more on optimization of processes, products and services. However in spite of the current situation there are some key areas which will lead the way for IT industry and they are:

• Security – Security is the topmost concern for any company. Physical security, data security and information security holds a very high priority especially with terrorism becoming digital. Terrorism is not only a threat to the life of citizens but also to the infrastructure, network, security and information in any company. Other security threats from hackers, phishing, internet security, virus etc would also loom large on all industries. IT security thus would be a core focus area in spite of the tight financial situation.
• Green IT – This is more about how to utilize computer resources efficiently. Green IT focuses on making environmentally friendly computing products and making them available for re-use. IT departments look to adopt environment friendly options, improved energy savings, power utilization and virtualization. There is a huge push from the government and regulatory authorities for need of Green IT in companies. Thus this area looks very promising for the future.
• Infrastructure Services Optimization – Infrastructure support services are the lifeline of any organization. However there is going to be shift in the spending pattern here. Companies would now look to optimize rather than expanding haphazardly. Models like Remote infrastructure services, Hosted solutions (SaaS) etc will take the lead when it comes to enterprise requirements within a company.
• Enterprise search and Collaboration – Search is the future, more importantly this coupled with collaboration feature is going to be too hot to handle. The growing size and reach of companies make it harder for managing the information within the company. Content/knowledge management tools like MS Share point, Lotus CMS etc will continue to be in demand.

After understanding the key areas let us have a look at the top sectors which will build lot of traction for the IT. They are Healthcare, Education and Public sector spending

Healthcare - Growing population comes with ever increasing healthcare requirements. The scale at which the Health care industry is growing makes it a very prospective sector for IT spending. Technology wise there is going to be huge need for access to real time information by doctors and staff. Also managing patient records and having a track of crucial life support system is going to be very critical. Healthcare domain is going to be a major area of play for IT companies.

Education – Historically during crisis time education sector have shown a drastic increase in the total number of enrolments. Increased focus from government on education, E-learning methods, virtual teaching, online enrolment process, real time access to information between teachers, students and parents etc are going to the change the dynamics of IT spending.

Public sector spending - Increased government spending on infrastructure and upgrading its existing legacy hardware and software applications gives rise to tremendous opportunity for growth for IT in public sector.

Thus it is imperative for IT companies to have a clear focus on the above sectors and the subsequent hot areas. In the heat of the current economic situation we may see a gradual shift in the offerings of IT companies to the above mentioned core areas and sectors. This will help companies overcome the current situation and maintain a decent growth rate.

Risk – Return – Reward: Does it still hold good ??

The ROI (return on investment) has always been measured against the risk involved in it. Business success has always been attributed to the risk appetite of the Management. High risk-High return strategy in spite of the current slowdown still looks good. However organizations across will have to rethink and look beyond the conventional risk-return approach. The Current situation is very demanding especially with lesser liquidity available for future investments. This requires the entry timing to be spot on, else there would be a major erosion in the value of the investment.

Approach followed by companies will broadly fall under the below three categories:
1) Wait and watch approach – They will shy away from any major investments and wait for the markets to stabilize. Risk Averse companies might be safe but will end up missing out on prospective and cheaper investment opportunities.
2) Cautious approach – These companies will be investing but with Limited risk appetite and with an expectation of a nominal return on it. The focus for these companies will be to hold on to its current market share and not on entering new markets.
3) Risk-return-reward approach – As always there will be High risk takers with spot on market timing for investment. They stand out of the league and emerge winners when market gets back to normal. However the percentage of this group compared to the overall number will be very less.

High risk takers will go for the kill by not only looking to consolidate their current position but by also capturing market share of competitors. Thus Risk-return-reward approach executed with proper understanding and timing of market will yield phenomenal ROI.

India's Soci-Economic roadblock to growth

We have been talking about India’s growth story and the strong fundamentals behind it. The key drivers for our growth being the huge talent pool, cheap labor, huge domestic demand and a decent government support.  All these factors put together made a great decade which attracted huge foreign Investments and created lot of employment opportunities. Our economy achieved a staggering growth during this period. In spite of the current crisis we are still holding good at a growth rate of 9.1% for last fiscal and 7.6% for Q2 FY09. We seem to have moved into a comfort zone by our growth story and the future of it on the basis of the above mentioned economic drivers. However, one thing we have never considered while singing our growth story is the socio-economic conditions prevailing in India and how it could play an important role in our future prospects. Religious violence, terrorism, naxalism, caste related violence, regional imbalance, poverty, unemployment etc are some of the common issue socio-economic issues we often fail to look upon while analyzing our journey ahead. Issues like poverty, unemployment and lack of human rights has given rise to religion, caste, region wise acrimony between people. We seem to have never moved on when it comes to our approach towards these issues. Incidents like the Khalistan movement, Ayodhya debate, Bombay Riots, 1993 Bombay bombings, 2002 Gujarat violence, Islamic terrorism, violence in Orissa, anti-Christian violence and the recent terror attack on Mumbai is a clear indication of our shallow mindset and hatred boiling within the country. Over years we have just kept playing the blame game on each other and the government on these issues. When will we wake up to the fact that the real growth is dependent on the growth of our people and not on the external factors? When will we realize that communal hatred doesn’t lead us anywhere? How can we spread education and learning to those deprived from it? What can be done to decrease the rich poor divide?

The recent attack on Mumbai should be a wake up call for all of us to get together and fight against the evil within us. The Precision with which the recent attack was carried out is possible only when information and help was rendered to terrorists by people within the country. Socio-economic problem is the main reason why people take the path of aggression and resort to terror activities. This will have a direct effect on our countries growth. In terms of business, travel and tourism, hotel industry, foreign investments, International trades are few of the many things that get affected due to this issue. Our economies growth is highly dependent on these internal factors. Thus unless we achieve harmony within the country it’s difficult to achieve a sustained growth.             

IT - Innovation holds the Key

We all know IT fits in as support function in the value chain of most of the companies. In fact IT never constitutes more than 5-15% of the operating cost in most of the industries. Also during troubled times IT budget would be one of the first to get slashed in most of the companies. In spite of all this, IT unlike other support functions has the ability to impact the business directly by managing, controlling and creating new channels for growth.

Current crisis as always has been no different for IT; companies across the globe are now looking to cut their IT expenses. This situation will impact IT perception into two broad levels. The first will be those set of companies looking to slash costs through all possible methods. This can be through layoffs, cutting down on their budgets, slashing their production and research spending etc. This would have a positive impact on outsourcing/off shoring activities. However this approach would not be healthy in the long run as the outsourcing here would be focused only on cost cutting and not on value creation and innovation. The second set of companies will also be looking for cost cutting but with a slightly different approach. In this case the focus would be on methods to adapt their business, making it more flexible, generating new avenues for growth with the most cost effective method. This approach would lead to business methods like profit sharing with hardware and software service providers, Pay as you go model (SaaS), Global Delivery with focus on value creation. Innovation will continue to hold good for these companies and cost effective methods like virtualization, hosted services (pay as you go), 0% financing on products and services will be very much in need. IT companies will have to continue to build on innovation and anything which promises a significant ROI for the customers.

There is no doubt that the spending in IT would reduce but the future will hold good for companies willing to adapt and innovate with new and better products and services. IT as a function will continue to remain one of the most important links in the value chain of any company.

Consumable goods – What lies ahead for them??

The financial Tsunami is far from over, every passing day we are bombarded with news and analysis on the future outcome of the slowdown. The ripples are being felt worldwide and claims of economies being immune are now things of the past. I still remember the advice given to me by one of the professors in college “Curb your desire for consumer goods as their value starts depreciating the moment you take them out of the showroom (shop or outlet)”. He now seems to be correct as globally it is the reduced demand of consumer goods that is playing the culprit. The cheap money policy gave way to easy credit which in turn resulted in creation of artificial demand for property, goods and other items. So what happens to all those fancy, materialistic desires of our life? Does it mean to curb our spending habits especially for consumables?

Now Let us have a look at the flip side of consumer goods industry. One of the key drivers for growth in these developed countries was the huge consumer base. This created huge demand for consumer goods and lead to the growth of both the industry and the economy (of course along with the growth in financial services, technology etc). Now what happens to India? The answer lies in our demographics. More than 50% of our population currently falls in the age group of 18-45 and by 2020 we are going to be the youngest country in the world. This is huge human resource compared to the fact that other countries are soon ageing out. Soon we would have the largest cost effective workforce available and that too across most areas. It is this resource which has the potential to thrust our economy to unsustainable heights. This is where the consumer goods industry fits in by catering to the needs of the huge consumer base we have created (pretty much similar to what had happened to developed countries). We will be able to attain a growth similar what the ‘baby boomers’ had done during 1980s and ‘90s for US and other European countries. To curb our desires by not giving in to consumer goods does not lead us anywhere. The answer is to equip and empower yourself to achieve what you had always desired in life. Get the best of those Lamborghini’s, Merc’s, Gizmo’s, Gadgets, the best of home appliances but just keep in mind one thing “earn it and get”. So irrespective of whatever effect this Tsunami has on us one thing is for sure, that in long run we are headed in right direction. Just be prepared and never let the desire in you die.