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Infosys (INFY) released the Q3 FY’09 financial results, today.

Following are the highlights:

Income from software services, products and business process management – Rs. 5786 Crores ( 35.47% rise against Rs. 4271 Crores, same period FY’08 )

Net Profit – Rs. 1641 Crores ( 33% rise against Rs. 1231 Crores, same quarter FY’08 )

Number of New Clients – 30

Employees Added – 5997 ( total 1,03,078 as on December 31, 2008 )

CFO Balakrishnan attributes the robust growth primarily to depreciating rupee.  In his own words,

Our operating margins during the quarter increased primarily due to depreciation of rupee which was to some extent offset by the depreciation of other major currencies against the US dollar

Via Times Of India

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Future of Indian IT

We have been seeing ups and downs in the Indian IT Arena, connected mainly with the slump in the US Economy.  This is a very much anticipated outcome, as a major share of the revenues of Indian IT Majors come from the US.  So what really does the future hold for the Indian IT Population?  Can the industry survive long as a “low-cost” destination?

To rationally analyze these questions, we must understand why India is viewed as an ideal destination for IT MNCs all over the world.  I would attribute this to two main reasons – Good quality of labor and Work getting done at a lower cost.  

First, let us consider the latter for discussion.  Getting work done at a lower cost, is purely an economic phenomenon.  Today India might appear to be the low-cost haven for many economic super powers.   But in the future course, if some country ‘X’ offers to do similar work at a much lesser cost, these super powers are sure to be lured.  Even with the appreciation of rupee, India still holds the top spot among countries which can do quality IT work, at a low cost.  But we cannot rely on this alone, as economy is bound to change over a period of time.

Next comes the discussion about the quality of work done.  It is a widely known fact that Indians are good with their logical and analytical skills.  These skills are so vital for the IT industry.  Further, Indians are very good at grasping stuff taught to them and are also excellent in adapting to changes.  These essential skills and the low cost have been attracting the international IT majors towards India.  (Please note that this post is limited to only IT Technical labor in India.  I am not considering the people working in other fields, who attract international majors).  But again, with the evolution of the Internet and the knowledge spreading its wings to all parts of the world, what is the assurance that India would not be pushed back in this aspect too?  China proves to be a prime competitor for India in both these fronts (low cost and quality).

So after discussing both these factors, we can clearly see one thing.  Going forward, India cannot be a leader in providing IT services, only with both these qualities.  I think there is a dire need to concentrate on the third aspect too – Innovative and Creative population.  So this has more to do with research and development, than with providing quality work.

I can see many Ph.D. fellowships offered in India by few IT Majors like HP and Microsoft.  Also IBM have their research labs located in New Delhi.  But, I still do not see a major thrust or interest in the younger generation to take part in innovative and research related activities.  Many MNCs call India as a hub for their research, but I can only see the economic reasons behind this.

I think one of the ways to make the future certain for the IT Industry, is for the Indian companies to concentrate on research activities.  They must encourage and support their employees to be innovative.  I would love to see more patents filed by Indians, related to Information Technologies.   India should really become a hub, for research related activities.  Right now our IT industry depends mainly on the US economy.  This must change and the international investors must look at India as a source of innovation.  They must come here only because of the creative stuff we do and which they would get nowhere else in the world.  This coupled with low cost and quality, would make India a real super power.

Thus learning new technologies is essential but creating and innovating new technologies must be our vision.  Now we have reached a stage where we are known to the world as good service providers.  It is high time to move to the next level, where we would be viewed as innovators and those who cannot be ignored even if the Rupee appreciates 🙂

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