IT - Sailing through tough waters!!

Greetings,

If you come to of think of IT as a sea and various IT companies as ships sailing through the waters to find greener pastures, you would agree that waters have become turbulent in the pretext of US slowdown and it's impact across the world.

Forrestor has forecasted the slowdown in the IT spending worldwide. The declining dollar has seen the IT service providers growing at 10+% in 2007. They may not see the same growth but the declining dollar and economic slowdown in US would still help them achieve 5-6% growth in 2008. Some people also claim that the picture would become rosy yet again in 2009 with the expected growth around 10%. So, it looks like the overall picture is not that bad; if not that good.

BUT if you read between the lines, the growth trajectory is cutting down by 50%. When IT companies started their year, they must have started planning/budgeting for '08 keeping in mind the growth of '07 because the vision was that US slowdown would increase outsourcing. But, 3 events changed the overall outlook by end of Dec and start of Jan.

1. All of the major financials showed the multi-billion dollars sub-prime write downs in their quarterly results.
2. The fear that sub prime issues might spill over to primary market.
3. The problem of credit growth that Mr. Bush tried to solve using stimulus package.

All of the above led to the major fall in consumer's confidence in US economy which also got proved with real estate meltdown, new home construction figures, jobless data, retail spending figures in US. The companies were suddenly not just looking at reducing the costs by simply moving more jobs to offshore. You can do that but there's a limit to it. They were looking now at strategic long term measures to eliminate the non-productive businesses, basically eliminating costs altogether. Which simply means "I don't need this non-productive / loss making / not-part-of-my-vision business. Right now, I don't need people working in this business. I don't even care if people working in that business were outsourced or not. I may re-visit my decisions once the dust settles down as I don't know how deep the roots can be."

So, in my view, IT companies got caught on the wrong foot where they expected fatter order pipelines but in reality they faced the loss of business; may be just for short period. Even in recent NASSCOM summit, the expectation across the board was that things will turn good in second half of '08.

Hope my company's ship sail through.
~ Navjot Singh Sohanpal