Scale Dilemma for Indian IT Services Providers

By admin, June 8, 2006 8:59 am

BusinessWorldIndia has an Web exclusive article (Registration Required) highlighting the dilemma faced by all Indian IT Services vendors, today almost every Indian IT company is planning a 'large scale expansion' in both size and scope of operations. Large companies are already in the thick of it & small companies are also getting on the band wagon, these are the very same companies that were claiming that their size helps them to stay focused on product development better than the larger ones.

The real question highlighted in the article is "will IT companies erode their strength by scaling up their current capacity without a long-term vision?"

  • adding numbers for a vertical expansion would not pose much of a problem for any company, the bigger roadblocks would arise at two levels-people and skills.
  • Indian IT industry's cost advantage is fast diminishing with rising salaries and attrition.
  • most small software companies that are racing on the growth path, there is pressure to increase the headcount
  • Companies, therefore, are forced to hire people from colleges and institutes that are hardly known for their software prowess.
  • inflict undue pressure on their teams by giving them the kind of work which they are incapable of doing within unrealistic deadlines.
  • Hiring below-standard recruits has a demoralising effect on competent employees.
  • Over a longer period of time, quality of work suffers and products, more often than not, face rejection by clients and customers. With a bottom line steadily dented by lack of growth, the company comes Full Circle and chops off its employee strength which got bloated after expansion.

This is an interesting problem faced by most small / mid sized IT Services Vendors , it is going to be interesting to see how they cope with the same, Also at the same time one needs to see how consolidation is going to effect business.

Source: 1

Prashanth Rai

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