Saturday, January 31, 2009

satyam-naash dept.

Its been a while since the Satyam fiasco came to light. For anyone who knows what Indian IT companies typically do, and how they operate, something like this was only inevitable.

What was amusing to me, when the story broke, was watching the sense of outrage amongst business news anchors. They must have felt very foolish, considering they had spent the last few years hobnobbing with luminaries like Ramalinga Raju, discussing Quarterly results and doing pieces on the great Indian Services miracle.

Still, no one in the press seems to be asking the tough questions about this industry. For starters, where is the value in it? Should we go overboard praising an industry just because it has high margins? Are high margins indicative of anything substantive being produced by these companies? Is their business model fundamentally sustainable? What are their long-term plans, considering the inevitable downward slide in the 30-50% profit margins, when salaries rise, and there is more global competition? Finally, before comparing them with Silicon Valley companies, are they producing anything of inherent value, or are they just pushing novices to do menial, labor-intensive work at rock-bottom prices? What strategic assets are they creating for themselves and for the financial security of the country as a whole?

IMHO, the Indian Software industry is just a novel manifestation of age-old feudalism. We Indians are very good at feudalism, it seems to have been wired into our genes. Swanky air-conditioned offices may look better than rice and wheat fields, but they are not all that different. And believe you me, the swankiness exists to impress customers and financial analysts, and air-conditioners operate for the benefit of the computers, not for the people. The day computer chassis' ship with a refrigeration unit, expect an en masse replacement of A/Cs by ceiling fans. Since heat dissipation in CPUs (especially with smaller form-factors and multicore etc etc) is not going to be solved anytime soon, this is unlikely to happen though.

I don't want to rubbish the contributions of these (for legal reasons, unnamed :-)) companies. They created an entire industry from scratch where none existed. But I do believe they are not as 'high-tech' as the business press so naively believes them to be. And they need to considerably invest in *real* (as opposed to fake) R&D to sustain themselves. Otherwise, they might just get wiped out overnight.


Pritash Chaudry said...


The Shaolin said...

R&D? Yet to hear any Indian IT cos doing that (significantly, that is!). True, most of the glorified IT-cos are just doing menial jobs, at massive scales. Sustainability is seriously a big issue of their business model. Wait till that gets busted in news pretty soon! (But for records, I don't wish that to happen!)