Indian IT industry in doldrums

Vinay had called today morning to gave an awful news. His company that was working on a leading-edge of telecom technology announced that it would be shut-down in a month's time !!
Vinay's company was not the first casualty for this global recession. Many other start-ups in Bengaluru have been shutting shops and the larger firms are announcing jobs/pay cuts.

Recession 2000: As I remember, the previous recession in 2000 was a boon of sorts for Indian IT industry. Back then, when the global tech firms such as Microsoft, IBM, Motorola were faced with the issue of cost cutting, they saw the large pool of talented Indian students as a low-cost substitute for their engineers. So they promptly reduced their head-count in North America & either outsourced to or developed their own centers in India. This had spurred the legendary growth of the Indian IT industry that lead to the growth of firms such as Infosys, Wipro, Sasken, etc.

Recession 2009: But in the current slowdown, its not just the global IT firms that are worrying about cost reductions, even the local Indian firms are facing the music to bring down their expenses. There's no other country that would offer the same kind of kind expertise and cost benefits. So they are either forced to decrease their headcount or salaries.

Companies that are working on the next-gen technologies are in a even worse state. These companies usually funded by VC's and their burn rate is high due to the heavy packages they need to offer to talented engineers they hire. Their break-even time is in the range of 3-5 years, when their technology actually gets adapted (if it eventually does get adapted !!) So if the investors get even a slight indication of not getting back their investment, they'll likely withdraw their investment. This is exactly what's happening in today's depressing economy..

Hopefully, as we've studied in our Macroeconomics course, this we'll recover from this slowdown by Q4 of 2009. Things will begin to get better soon..thanks to Barack Obama :)