Tuesday, February 10, 2009

Why don't Indian IT vendors target Indian market in a big way

"Why can't India be the alternative market that the ailing Indian IT industry can look up to?"

This was the question that popped up during lunch time between us at office. A deluge of answers followed.
  1. Indian market nascent still
  2. Not enough big players to outsource big work
  3. Indian IT vendors charge US dollar rates to Indian customers
All true...but they brought up new questions.... 
  1. Why nascent?
  2. Why not more big players?  
  3. Why USD rates for Indian customers?
As the discussions ensued two points came out that sort of answered the primary and secondary questions.

1. Most sectors in India are unorganised: Retail Sector, Utilities sector, Transport sector, Hospitality sector and more. Almost all sectors are still a fragmented lot. Lot of mom and pop stores all around the country. They lack the economies of scale to go in for big IT orrders that can be justified against the profits they make. That also tells you why they cannot afford US dollar rates that IT vendors charge. the argument holds true on why it does not make sense for Indian IT vendors to go after the Indian market. Too many tries - too few hits - and even fewer to make a mark would be the result. 

2. Indian IT vendors play to the American stock markets: The ADRs and the NYSE listings are what drive the Indian IT companies primarily. I am not saying this is wrong but a strong growth in these stock exchanges must be reflected through a dollar growth. Growth in rupee earnings must be 50 times as much as dollar earnings to match similar feats. Keeping the market and the shareholders happy with your earnings forecasts and your quarter on quarter growth is a real need that public companies get exposed to. No prizes for quessing that the balance tilts in favor of the stronger currency. You can't expect to show earnings in the weaker currency and keep impressing the market that runs on the stronger currency.

Certainly points that can't be dismissed cheaply, eh?

1 comment:

Anonymous said...

Mainly, cost of the software, Cost of support makes entreprise stakeholder think against going for high cost products like ERP or datawarehousings.

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