With the new economic activities in US, there has been a growth in jobs in US, at the same time more work offshored to India. Also the positive sentiment is shown in Britain and Europe that in turn helps India in getting more work. A global economic recovery is good news for those who are relying on the IT budgets. Even the Software product development companies are also benefited with this trend. These all looks like a positive trend in the IT industry.
(image taken from trackworks website)
But, there are two main reasons that are having a negative impact on the growth of IT industry in a short term. It is majorly on the decreased margins or the increased costs with relatively less increase in topline.
- The annual pay raise to its employees
- Higher visa costs for the employees in the customer locations
Solution: The way the margins can be increased is by:
- Automation of routine tasks, so that increases in staff productivity will stay ahead of costs
- Indian IT companies should gain confidence of the clients’ core activities such as research and development areas so that those core activities can also be offshored, increasing the work that can be offshored.
There is a very possibility that Indian IT companies can cope up with the margins, but as mentioned, it may be difficult to have it done in the first quarter.