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December - 2008 - issue > Slowdown Impact
2-3 Difficult Quarters, Then New Opportunities Abound
Dr. Anand Deshpande
Thursday, December 4, 2008
As is evident, in the current economic downturn the outlook for most companies is not great, and everybody is waiting for the economic situation to reverse. Companies across the board are slowing down on spending, and outsourced product development (OPD) firms like us have also been asked to reduce our spending as well.

Incidentally, the goings-on in the present crisis are similar to what had happened during the 2000-01 crisis. Even then, companies were cutting costs, and were looking at paying us less for the same job. This continued for couple of quarters and when the markets came back, we saw some very good opportunities coming by. And I have reasons to believe that this time too, once the crisis subsides after two or three quarters, we will see a lot many opportunities opening up.

For one, on the technology side, there a lot of new things that are in the pipeline. This includes new chip launches, coming of the multi-core and increasing penetration of smart phones. Also, Software as a Service (SaaS) is no longer a discussion topic, but is starting to come into practice. Cloud Computing and Service Oriented Architecture are seeing increasing customer adoptions even in the current conditions. Companies need to think about new and innovative ways of leveraging consumer and web 2.0 technologies.

Turbulent times are best opportunities to explore new ideas and to implement disruptive changes. There are several new technology ideas that are getting ripe for deployment. and with the amount of these innovative ideas in the pipeline, I think in the long run, new business opportunities abound.

There is a rather interesting, and now quite popular presentation from Sequoia Capital to its portfolio companies which paints a very bleak picture of the market, and has asked start-ups to reduce their burn-rate. But even this, in the long run, will help the Indian IT companies. And how!

Companies across the board are reducing costs on their end; which, in other words, means that they are cutting jobs. Once the market recovers, these companies will find it difficult to hire locally; this, because the recovery will happen gradually. And outsourcing companies like us will be in a position to offer the much required flexible growth.

However, IT companies who look forward to reap these new opportunities, must first hold on to their current customers and work together with them. This could be either in the form of seeing what projects are not working for them and taking such projects on; discounting prices, in the form of doing more for the same price.

Also, OPD firms need to work on new business propositions like product sustenance plans and take more complete ownership of products during this tough phase. Some of these could help win new deals once things turn for the better. And though we continue our talks with new companies and customers we see that customers are not ready to sign a new vendor or ready to invest in anything new.

If we, as an industry, are able to emerge together with our existing customers through these two-three difficult quarters and also work on new value propositions, we will stand to gain. The challenge is to weather the storm. We need to hold on to our customers and be more flexible in our work and approach; and empathize with our customers. We must anticipate the situation that our customers are likely to be facing and explore ways of how we can help them emerge stronger in these difficult times.

The author is Chairman and Managing Director, Persistent Systems
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