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Recession – the positive side of I.T.

Since Last 1.5 – 2 years whole world has been reeling under severe recession. We all have heard about job cuts, cost cutting, salary freezes, reorganizations, blah blah  blah….

But, was all that so bad during those trying times?

Not certainly. In this blog I would like to point out some positive effects of recession especially on I.T. sector.


a)      Innovation – 

Necessity is the Mother of all Inventions

This adage holds true even in todays circumstances.  Many companies have took recession in their stride and have moved their foucs to innovating and launching new products according to the changing scenarios.

During last 2 years considerable investments and researches have been made in areas of Cloud Computing, Software as a Service ( SaaS ), Micro Applications, Widgets,  Business Data Reporting etc. 

One particular example worth quoting is Cisco’s investments and innovations in area of Tele Presence ( Video Confrencing ).  Cisco has smartly tapped the market that has arised due to travel  cuts and cost cutting amongst organizations.


b)      Consolidation

Consolidation in the Industry-

Although M&A  activity has slowed down in whole industry but I.T. sector seems to defy the laws, in last 2 years we have seen some big M&A’s happening like Dell – Perot Systems, HCL – Axon,  SAP – Business Object and ongoing Sun- Java deal.


Companies sitting on huge cash have used recession as an opportunity to get good bargains in areas in which there competency was lacking.

Consolidation within the industry has helped customers as now they can get everything under roof from new formed I.T. mega vendors.


Consolidation Within

Now this is one area which has seen massive revision. Companies have dramatically changed\ revised their strategies during this period. Companies have started de risking their business by reducing dependency on U.S and Europe and by exploring new markets in LatAm, Asia.


Portfolio decisions in the company are more focused on launching products\ software for the small scale sector. Also old products which have long tail have seen the maximum portfolio cuts.


Another area that is worth mentioning here is Organizational Restructuring, we’ve seen shuffling of positions, carving new Lines of Businesses, merging of existing units. 


Focus on core competency – Recession has forced many big non I.T companies to rethink over their strategy of creating their own captive IT units, the focus has now shifted to looking on core competency rather than worrying about managing IT assets. During last 2 years we have seen considerable number of companies selling their captive IT\ BPO units to big IT firms, one such example is Infosys Taking over Philips BPO.


All these consolidation activities have created lean organizations who now work on what they are best at.


c)       Best Practices

Measures like cost cutting and cutting the extra flab within the company has not only resulted in layoff’s but it has also resulted in revisting the whole operational model of companies.


Companies have found new innovative ways to cuts cost ( ex. Cutting down on travel and improving on communication infrastructure ).


Earlier in Indian IT industries, onsite –offshore ration was 1:3 but now these companies have drastically cut down on onsite travels and that too without risking their businesses. It’s just like that they have found that we never needed so much of onsite positions.


New Development models like Agile and Lean have gained momentum during these times as the main motive of these models was to eliminate waste and do more in less time.


One major plus point of recession is that it has forced employees to revisit their skill sets, improve on them and consistentl y work harder to keep them afloat in market. This is quiet contrasting to the complacency which was set during boom time, people were just worrying about experience in terms of years rather than relevant experience in a particular domain\ technology. Companies too have become very picky and they are now hiring people who can quickly get on board and start contributing rather than giving them long training periods to become productive. In effect the bar has been raised for people and I feel it is good for us only.


d)      Stability

Period of Recession was like an acid test for companies, employees. Everyone was\is  sitting at the edge. Many companies with strong legacy and proud past could not stand tall in these difficult times and became history.  Probably that was due to the fact that they were too rigid in the way they used to do business. Companies who changed with the times were able to sail through.

Companies who managed to sail through these times will attract more customers as customers now will not hesitate now to give their mission critical IT systems to players who have stood tall in adverse times. There will be increased level of confidence and trust build up for surviving companies.


Another significant advatage of recession was decreased levels of employee attrition.  IT sector no doubt has one of the largest attrition rate, but thanks to attrition employees were left with no other option rather than to sit wherever they were. This has resulted in better stability within the companies.


In my opinion, these were the good things that happened during bad times.  I’m sure we all had a lot of personal takeaways as well.


Let us equate recession with the medicine that people initially complain ‘is bitter’, but in the end come out far healthier and are better off


Hoping for a speedy recovery…..


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