Can Indian IT body shopping survive $146 oil price?
Arti Singh
Jul. 3, 2008

Indian IT body shoppers specialize in custom building software and supplying programmer and analysts to their presumed cash rich American and European clients. But the cash-fat clients are experience severe contraction in their economies because of lower US Dollar and $146 a barrel oil price.

The United States and Euro zone are both headed into recession because of the doubling of oil price in the last nine months.

The western clients have started laying off employees. In US the payroll declined for the sixth consecutive months. The leading indicators and the service side of the economy are in decline too,.

The US and European businesses have started looking at the value additions of the Indian IT body shoppers and call center operators. These companies in India are struggling recruiting the good talent. The base cost of operation in India is rising very fast with hyperinflation in the country. As a result Indian IT body shoppers are very eager to raise their price citing global inflation.

While there are global hyperinflation in food and energy sector, the service sector like IT body shopping and call centers are experiencing lower demand and lower per unit revenue. Simply put it is deflationary environment. The Indian IT body shoppers have lost their pricing power. No business can survive for long without genuine value addition to their clients and consequently the power to price higher.

The cost of operation is increasing. The talented youth from Engineering schools are not that eager to join the ‘boring’ IT to reengineer old software in America and Europe. They are more eager to explore the bio medical engineering, genetic technologies and so on where the real growth will happen in the next fifty years.

The IT body shopping may be history in the next ten years with steady decline in demand and price. The business model may totally disappear as businesses in U and Europe decide to less reengineer software and use commercial off the shelf products (COTS).

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Arti Singh
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