Is the IT saga of India over? Are we seeing the demise of India's IT success story? Has the recession finally burst the IT bubble? These are questions that lurk in everyone's mind these days. These are important questions due to the visible effects this industry seemed to have for at least a decade. For the first time since independence, the best and the brightest chose jobs in private companies than government. A sense of the "harder i work, the more i earn" kinda sense started pervading amongst the youth. Also, the IT industry tended to erase the divisions created within govt departments due to the effects of Reservation (which simmers in the background in govt departments). But good things as all bad things don't last forever.
A sense of uncalled for over-confidence and euphoria started pervading. From being prudent savers (our parents are the best examples here) many became consumerist like Americans, running behind every gadget, latest cars. There is a problem when people take out a loan just to avoid taxes. It is all fine if these loans are short term and within someone's repaying capacity. But when a person making 50K-75K a month takes out 25-40L as loan for an apartment, it is mindless. They started believing this trend of sky high salaries will only keep growing. We all know what this has led to. A huge real-estate bubble. A 2400 sq.ft plot in suburban chennai going for more than a crore is a joke. A similar plot of land a couple of hours from chennai cost around 25 lakhs. You know it is a bubble when when a plot with no access to basic amenities like water, 24 hr electricity or public transportation costs that much. But everyone bought into the idea believing the IT boom would never end. With this recession, many would be either laid off or would be forced to take a pay cut which would drastically reduce the disposable income which in turn will affect the housing loans that our banks hold. This begs the question, are our banks in for some serious trouble like here in the US because of bad loans adding to our owes?
Our IT industry being what it is might have to go through a rough period because of this downturn. Even if it is able to make this through without much damage, the future for the IT professionals aren't looking great. When anyone from any background with a degree can either do a computer course or do a MCA to move into the field and given India's scale, we know there is going to be a too much supply than demand one day. The recession is only making it faster. This on the long run might help in keeping the wage arbitrage in favor of India, but the corollary is that the high pay packages associated with IT will be a thing of the past. Also, even before the recession there was a school of thought that said India is losing its edge due to wage inflation and shortage of qualified talent. In either case it is looking ugly.
How this is going to play out in the short/medium term? Given the US political compulsions and the steps being taken(US has removed the tax cuts for offshoring), the short term is very bad, especially people who are graduating from a variety of streams and who were planning to move to BPO or IT/ITES jobs. For people who are already working in this field, many would be able to ride this storm. However, there would be a significant portion of the workforce which would either end unemployed or under-employed for a sometime. For the lucky ones with jobs would have to take steep pay cut. Since the US tax incentive is out, the clients might push Indian companies to cut their margin which will surely affect the pay and jobs. All we can hope in the medium term is that this US would take all the right steps to avert this recession from becoming a depression. If the economies around the world start recovering by 2011, that would be good news. But the bad news is that no one knows how it is going to play out.
Many have worried during the boom times that the best minds from a wide variety of streams are moving to IT field because of the pay robbing other fields of quality manpower. This phenomenon is everywhere. But it always evens out, sometimes in very ugly ways. There is not much the government can do here unless it starts its older license raj days. If many of the industries are growing at similar rate and the rate of return is more or less equitable, it can prevent such exodus. But none of us want our govt to decide how many can go into CS and how many want to do accounting. Just like in the stock market and real estate market where we saw irrational exuberance, the IT job market nearly made a fool out of everyone to believe it will last forever. This is only natural. Some people might be very badly hurt in this process, but it is unavoidable.
In a way this recession might be a boon in disguise. The real estate market and the high inflation made it almost impossible for people who are not into IT to lead a decent life in the metros. This drop should bring back the prices to levels where the rest can at least think of educating their children, much like my father who though was not earning much was able to afford good education for me and my brother. Doing the same job he would not be able to do that again now. So, in a larger sense the society can have a sigh of relief and other fields might look equally lucrative if not better.
The biggest worry for the government apart from the slowdown in the economy is to find ways to employ the young and unskilled in the long run. India in a few years would have the highest number of youth in the working age. It already is the youngest nation. For whatever its worth IT/ITES industry employed barely 2 million in all these years. Some might argue that due to the high consumption of the IT types there would be a trickle down effect which is true, however, as we are seeing this is not enough or a long term solution. Do i have a solution for this? No. Investing in infrastructure, agriculture and other social development projects which could employ unskilled youth in large numbers can be a start.
If this demographic is forgotten, we would only see outfits like VHP, Bajrang Dal, Ram Sena (and their political masters) recruiting these disgruntled youth for talibanisation of India. We are already seeing this with the Mangalore incident and all the valentine day episodes. If India is to avoid a Maoists take over like in Nepal or talibanisation of our country in the name of Hindu culture or naxalism becoming an all India phenomenon, it has to act with a longterm vision. People who claim that we have survived this long and we will survive in future forget the difference between surviving and living. When more than half the population is surviving with less than what many pay for a coffee each day, there would be a backlash sooner or later. If unemployment, recession, climate change, water problem all start to hit together we won't be in a position to respond to any of them. But here i am hoping that would be the worst case scenario and we would never have to deal with all of them together. We will surely have to face each of them for sure.
Rahman and Pookutty are atleast a couple of reasons to cheer about in spite of the dire mood of the post :-)
Monday, February 23, 2009
Tuesday, February 10, 2009
Bailout : Lets hear from Stiglitz
We have all wondered how the morons at Wall St can be so oblivious to what is happening around them? You can see that in action here, at least it comes close. The morons at CNBC asking for stock tips when these guys are basically telling we are very close to the edge of a financial abyss. Surreal. Watch here.
Sunday, February 8, 2009
Saturday, February 7, 2009
Obama its time to pull a Bush to get this economy back on track
The economy is on a downward tailspin and with each passing day a few thousands more lose their jobs. There is a consensus that this is next only to the Great Depression of 1930s only because this time we assume that the government will act decisively and correctly. So, any inaction or hand wringing can produce a depression out of this financial turmoil. Is Obama showing the leadership we all expect out of him (and the democrats in congress despite their pusillanimous performance during Bush years)? The answer is a clear cut NO.
Having got a great victory and still during the so called "honeymoon" period he should have used that political capital to tackle the biggest financial crisis in over 70 years (Remember, Bush wanted to use his political capital to privatize Social Security). This is the time to show leadership. He should realize this is not the time to sing kumbaya and talk about the virtues of bipartisanship. His approach to the stimulus till now has been a huge failure. If one gives around 30% of ones plan to the opposition for their support and gets zero votes, what else can we call it. I am not sure if he is naive to be taken for a ride like this by the republicans. This already compromised stimulus package is further diluted in the senate to the tune of 100 billion dollars. Do the democrats even know how to pull a punch? All i see is them waiting to cave to every ridiculous demand of the republicans. This is the place where the President, much like what Bush did during his time, threatens with a veto and gets a stimulus package that would work. This is not the time for bloody 'bipartisanship-at-the-cost-of-nation'.
There are fights that have to be fought and there are times for negotiation and deliberation. Though many in the west might not know, this is the crux of Bhagavad Gita. There are fights which have to be fought. One can hate what all Bush stood for. But that doesn't mean just because he was partisan, you would want to act different for the sake of acting different. What matters is the final result. Bipartisanship could be a means to an end. Not an end in itself. This is the time for Obama to pull a Bush. Veto this ridiculous stimulus package and force the congress to work on a more workable package within this week. Let them stay in the Hill 24/7 until they get this done.
Bush used all his political capital and power to do everything that is wrong. Its time to use all those tools to do the right thing. This is not the time to renounce those powers and tools just to differentiate oneself from Bush and the Republicans. Brains alone are useless if you don't have cajones.
Having got a great victory and still during the so called "honeymoon" period he should have used that political capital to tackle the biggest financial crisis in over 70 years (Remember, Bush wanted to use his political capital to privatize Social Security). This is the time to show leadership. He should realize this is not the time to sing kumbaya and talk about the virtues of bipartisanship. His approach to the stimulus till now has been a huge failure. If one gives around 30% of ones plan to the opposition for their support and gets zero votes, what else can we call it. I am not sure if he is naive to be taken for a ride like this by the republicans. This already compromised stimulus package is further diluted in the senate to the tune of 100 billion dollars. Do the democrats even know how to pull a punch? All i see is them waiting to cave to every ridiculous demand of the republicans. This is the place where the President, much like what Bush did during his time, threatens with a veto and gets a stimulus package that would work. This is not the time for bloody 'bipartisanship-at-the-cost-of-nation'.
There are fights that have to be fought and there are times for negotiation and deliberation. Though many in the west might not know, this is the crux of Bhagavad Gita. There are fights which have to be fought. One can hate what all Bush stood for. But that doesn't mean just because he was partisan, you would want to act different for the sake of acting different. What matters is the final result. Bipartisanship could be a means to an end. Not an end in itself. This is the time for Obama to pull a Bush. Veto this ridiculous stimulus package and force the congress to work on a more workable package within this week. Let them stay in the Hill 24/7 until they get this done.
Bush used all his political capital and power to do everything that is wrong. Its time to use all those tools to do the right thing. This is not the time to renounce those powers and tools just to differentiate oneself from Bush and the Republicans. Brains alone are useless if you don't have cajones.
Friday, February 6, 2009
US Senators against non-immigrant H1B visas
As the economic turmoil gets severe this is a time for all politicians to score some points. H1B is one of the easiest to score such a point. After all, targeting foreigners and portraying them as greedy crooks ready to grab a job that belonged to an American is so easy. In this time of high unemployment and when emotions are running high, most people wouldn't be ready to do a simple logical reasoning to see through these political sound bites.
From Yahoo:
Let us try to understand what the implications of this are. These senators are barking up the wrong tree. The banks that take money are in a very bad state and are struggling to survive. As much as the banks are recapitalized with taxpayer's money, if the senators have their way, they are going to make it difficult for these banks to recruit the best of talent since they are cut off from a significant portion of available talent pool making it expensive to recruit and retain talent. This puts these already struggling banks at a severe disadvantage compared to its competitors. Throwing yet another road block in the way of these struggling banks is not the best way to revive them. While at the same time money is being thrown at them because they are too large to fail making them huge cash burning institutions.
Are there are misuses of H1s, L1s and other visas? Yes. But it is incumbent on these legislators to rewrite these visa rules to be more effective. Not punish the H1 holders and banks. But this is easy compared to proactively legislating to improve the visa rules to reduce misuse and to retain well trained and skilled talent. Like any politician around the globe these senators have taken the easiest route and portray themselves as working towards American interests, when they are not.
Many Americans who are hit by this recession and losing jobs on a daily basis take kindly to this. This is perfectly understandable in a situation like this when emotions are running high. I cannot sit here and tell them to think rationally when they end up without a job and have a family to feed. But what i am trying to say is that the legal immigrants who come here and get their masters and ph.ds are valuable assets for any country and it is in America's interest to retain the best. Many still think of India and China as call centres and sweatshops alone. However, it is only part of the story.
India and China with their huge populations will always have wage advantage. However, they are not the India and China of 1950s or 1970s. America ascended to the top right after World War 2 when much of Europe was devastated and much of Asia was illiterate and barely coming out of colonial rule. Now these countries have invested huge sums in improving their infrastructure and education. They are in a much better position to compete with US. Europe with its huge market and much better social equity and security would also give US a run for its money. At this juncture throwing out this essential ingredient for success, viz skilled talent, for political reasons, though might look very attractive in the very short term, is incredibly futile.
So, my request to Americans, if you want push your congressmen to act on the visas, push them to reform it in a way that makes the program effective. Making arbitrary blanket calls for banning would only put America and hence its people at a disadvantage. People like me who are here and who have made US their home, but who don't have a voice like you citizens, do want America to prosper.
Here is a radio program discussing Reverse Brain Drain.
From Yahoo:
In what could be a cause of worry for Indian IT professionals, two US Senators have introduced amendments to the economic stimulus bill, which if passed would prevent US companies receiving the federal bailout money, from hiring H-1B visa holders. The amendment if approved by the Senate would have an immediate impact on Indian IT professionals, as it is they who are the major beneficiaries of the H-1B visa programme.
Let us try to understand what the implications of this are. These senators are barking up the wrong tree. The banks that take money are in a very bad state and are struggling to survive. As much as the banks are recapitalized with taxpayer's money, if the senators have their way, they are going to make it difficult for these banks to recruit the best of talent since they are cut off from a significant portion of available talent pool making it expensive to recruit and retain talent. This puts these already struggling banks at a severe disadvantage compared to its competitors. Throwing yet another road block in the way of these struggling banks is not the best way to revive them. While at the same time money is being thrown at them because they are too large to fail making them huge cash burning institutions.
Are there are misuses of H1s, L1s and other visas? Yes. But it is incumbent on these legislators to rewrite these visa rules to be more effective. Not punish the H1 holders and banks. But this is easy compared to proactively legislating to improve the visa rules to reduce misuse and to retain well trained and skilled talent. Like any politician around the globe these senators have taken the easiest route and portray themselves as working towards American interests, when they are not.
Many Americans who are hit by this recession and losing jobs on a daily basis take kindly to this. This is perfectly understandable in a situation like this when emotions are running high. I cannot sit here and tell them to think rationally when they end up without a job and have a family to feed. But what i am trying to say is that the legal immigrants who come here and get their masters and ph.ds are valuable assets for any country and it is in America's interest to retain the best. Many still think of India and China as call centres and sweatshops alone. However, it is only part of the story.
India and China with their huge populations will always have wage advantage. However, they are not the India and China of 1950s or 1970s. America ascended to the top right after World War 2 when much of Europe was devastated and much of Asia was illiterate and barely coming out of colonial rule. Now these countries have invested huge sums in improving their infrastructure and education. They are in a much better position to compete with US. Europe with its huge market and much better social equity and security would also give US a run for its money. At this juncture throwing out this essential ingredient for success, viz skilled talent, for political reasons, though might look very attractive in the very short term, is incredibly futile.
So, my request to Americans, if you want push your congressmen to act on the visas, push them to reform it in a way that makes the program effective. Making arbitrary blanket calls for banning would only put America and hence its people at a disadvantage. People like me who are here and who have made US their home, but who don't have a voice like you citizens, do want America to prosper.
Here is a radio program discussing Reverse Brain Drain.
Wednesday, February 4, 2009
Desis: What are our options during this recession
All of us already know that we are going through one of the biggest global financial turmoil in a long long time. Governments across the world are trying to address this with pumping huge sums of money into their economies. However, these measures have been inadequate. There have been job losses across fields in almost every country. Given that US is one of the severely hit countries, within which tech sector is one of the biggest casualties, what does the outlook look like for us desis who are employed mostly in this field.
Before going any further let me make it clear that this post is just to throw my thoughts to hopefully start a conversation which might throw light and make us understand the risks and opportunities in our immediate and distant future.
The US economy is on a downward spiral as consumers here tighten their belts and since 70% of US economy depends on consumption there is a positive feedback of bad news. As more people get laid off, the less they consume leading to more businesses going bust. Also, the US was flush with cheap credit for the past 5-6 years and there was mindless consumption. Even if the economy recovers in a period 2-3 years there is no reason to believe that things would go back to 2006-2007 level consumption. And we desis typically are in the tech side which are in many cases based on the consumer products (like cell phones and other gadgets) or discretionary spending.
Given this situation what can we do to get through this recession? From my perspective, we have three options in the long term. The short term strategy of moving to a consultant (if you lose your FT position) is ok if one holds an optimistic view.
1) Go back to school to upgrade our skills.
2) Go back to India
3) Hope for the best.
Let us look each of them in a little detail.
Back to School: This is the best option if one is not married yet. There are a number of new skills one can learn to be ready. This is very important for us in the tech field. No matter how much you think you know, there is a need for updating oneself throughout the career. But there are a few considerations.
1) Given the budget cuts all across, the universities aren't going to have funds to provide scholarships. So most likely fees is going to be from our pockets.
2) How easy is it for us to jump between H1 to F1 and back to H1. I don't think its as easy as many would like to think.
3) Which field to do? Many desis think of MBA immediately. However is it such a great idea? Many Americans take to MBAs anyways and due to this downturn there will be a huge number of MBA grads who will be coming out at the same time. Also, people graduating out now will most likely be unemployed or underemployed during this period. So, is it wise to take on so much debt or burn all of our savings during this lean period on MBA?
4) Many out there are not Ph.d material, nor are many in the mindset to put another 3-5 years in school just based on this downturn.
However, if one is financially well settled without many responsibilities at this point, this is probably the best time to get your MBA or any additional degree or certification. If one has a family to support (either here or in India) or not on a firm footing financially, venturing into another degree, putting oneself without a source of income for another two years is pretty risky.
Go back to India: This is considered to be the worst case scenario by many desis (who ever goes back?). But i am not sure if this is the worst case scenario. This is a good option if we have a decent offer back home (i understand the a decent offer means different things to different people). Instead of spending our hard earned savings to get through this pretty long recession without a job (especially if one has to support a family), this would be a better option. One can keep earning, gain more experience. Once we have more experience (if you have a masters or if you already have GC) we can always come back when the market moves up. With most of us being in the tech field, finding that decent offer is the biggest obstacle since our IT industry is solely dependent on production support kinda roles for the MNCs in US and Europe. How our IT industry would do over the next 2 or 3 years if the state of the economy deteriorates further in the US and Europe is anybody's guess. I would think even if there are no job cuts, there would be severe pressure on the pay scale. I believe the days of unheard of pays and pay hikes (in Indian context) would become a thing of the past. But if one is from a pure EE field and can get in one of the research centers, the probability of losing the job is much less though the kind of research being done might not be exactly on par with the work being done here. All in all, personally i favor this option of keeping my savings and gaining experience over sitting here without a job and not ready to spend on education.
Hope for the best: This is the option most of us after a lot of thinking and anguishing would take, not because of logical reasoning, but because it is the easiest. It is so much easier to postpone tougher decisions for later than to make them now. What many would reason is to have a project for at least 4 to 6 months a year for the next 2 years and live off of that income. This might be the one many would be hoping for. But this strategy is based on the assumption that things would get ok within two years. However, it 2 took years for the economy to come back on track after the 2001 tech bust. But what has happened now is bigger and deeper than anything that happened in 2001 and this time almost every field is severely hit. So I am not sure how prudent it is to use this as an example.
All in all, in my opinion, going to school if possible after thinking hard on the field is the best option in the short and long term if feasible. With a family and if GC is available, starting to look at opportunities in India would be prudent. This would bring down the expense, give the children a taste of India. The third option though looks like best of both the worlds, it is on a longer term the worst option. It might end up putting one in a back foot since one does not learn anything new, nor gain relevant experience and in the worst case might end up losing the savings too.
Furthermore, it is not easy to save in this country, especially if only one is working in a household. Brijesh has given the general picture of this here.
Before going any further let me make it clear that this post is just to throw my thoughts to hopefully start a conversation which might throw light and make us understand the risks and opportunities in our immediate and distant future.
The US economy is on a downward spiral as consumers here tighten their belts and since 70% of US economy depends on consumption there is a positive feedback of bad news. As more people get laid off, the less they consume leading to more businesses going bust. Also, the US was flush with cheap credit for the past 5-6 years and there was mindless consumption. Even if the economy recovers in a period 2-3 years there is no reason to believe that things would go back to 2006-2007 level consumption. And we desis typically are in the tech side which are in many cases based on the consumer products (like cell phones and other gadgets) or discretionary spending.
Given this situation what can we do to get through this recession? From my perspective, we have three options in the long term. The short term strategy of moving to a consultant (if you lose your FT position) is ok if one holds an optimistic view.
1) Go back to school to upgrade our skills.
2) Go back to India
3) Hope for the best.
Let us look each of them in a little detail.
Back to School: This is the best option if one is not married yet. There are a number of new skills one can learn to be ready. This is very important for us in the tech field. No matter how much you think you know, there is a need for updating oneself throughout the career. But there are a few considerations.
1) Given the budget cuts all across, the universities aren't going to have funds to provide scholarships. So most likely fees is going to be from our pockets.
2) How easy is it for us to jump between H1 to F1 and back to H1. I don't think its as easy as many would like to think.
3) Which field to do? Many desis think of MBA immediately. However is it such a great idea? Many Americans take to MBAs anyways and due to this downturn there will be a huge number of MBA grads who will be coming out at the same time. Also, people graduating out now will most likely be unemployed or underemployed during this period. So, is it wise to take on so much debt or burn all of our savings during this lean period on MBA?
4) Many out there are not Ph.d material, nor are many in the mindset to put another 3-5 years in school just based on this downturn.
However, if one is financially well settled without many responsibilities at this point, this is probably the best time to get your MBA or any additional degree or certification. If one has a family to support (either here or in India) or not on a firm footing financially, venturing into another degree, putting oneself without a source of income for another two years is pretty risky.
Go back to India: This is considered to be the worst case scenario by many desis (who ever goes back?). But i am not sure if this is the worst case scenario. This is a good option if we have a decent offer back home (i understand the a decent offer means different things to different people). Instead of spending our hard earned savings to get through this pretty long recession without a job (especially if one has to support a family), this would be a better option. One can keep earning, gain more experience. Once we have more experience (if you have a masters or if you already have GC) we can always come back when the market moves up. With most of us being in the tech field, finding that decent offer is the biggest obstacle since our IT industry is solely dependent on production support kinda roles for the MNCs in US and Europe. How our IT industry would do over the next 2 or 3 years if the state of the economy deteriorates further in the US and Europe is anybody's guess. I would think even if there are no job cuts, there would be severe pressure on the pay scale. I believe the days of unheard of pays and pay hikes (in Indian context) would become a thing of the past. But if one is from a pure EE field and can get in one of the research centers, the probability of losing the job is much less though the kind of research being done might not be exactly on par with the work being done here. All in all, personally i favor this option of keeping my savings and gaining experience over sitting here without a job and not ready to spend on education.
Hope for the best: This is the option most of us after a lot of thinking and anguishing would take, not because of logical reasoning, but because it is the easiest. It is so much easier to postpone tougher decisions for later than to make them now. What many would reason is to have a project for at least 4 to 6 months a year for the next 2 years and live off of that income. This might be the one many would be hoping for. But this strategy is based on the assumption that things would get ok within two years. However, it 2 took years for the economy to come back on track after the 2001 tech bust. But what has happened now is bigger and deeper than anything that happened in 2001 and this time almost every field is severely hit. So I am not sure how prudent it is to use this as an example.
All in all, in my opinion, going to school if possible after thinking hard on the field is the best option in the short and long term if feasible. With a family and if GC is available, starting to look at opportunities in India would be prudent. This would bring down the expense, give the children a taste of India. The third option though looks like best of both the worlds, it is on a longer term the worst option. It might end up putting one in a back foot since one does not learn anything new, nor gain relevant experience and in the worst case might end up losing the savings too.
Furthermore, it is not easy to save in this country, especially if only one is working in a household. Brijesh has given the general picture of this here.
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