[vasoo]

A global recession can be expected if the big powers like USA or China experience troubled times. Currently USA is running on free money with near zero interest rates. Any attempt to jack up the interest rates will have a negative impact in the growth of economy which may again push the world towards recession. Fed is clearly aware of that and is postponing any such decision. However improving employment numbers over the last few years will keep pushing them towards increasing interest rates to avoid inflation.

[comfortablynumb]

Might be a little early for panic stations, but still....

http://blogs.wsj.com/moneybeat/2016/...g/?mod=e2fbRBS

[Sebring]

Morgan Stanley's ringing the alarm bells

http://www.ndtv.com/video/player/ndt...-lateststories

[Samurai]

It is starting...

http://www.livemint.com/Industry/V2s...d-to-hire.html

[sgiitk]

I think this debate in India has been triggered by the Keynesians led my Subramaniam Swamy (student of Samuelson). People forget that a Keynesian has a total dislike of Monetarists, and esp those like Rajan who is from the Chicago School (most likely adviser Stiglitz).

[Samurai]

And still TCS won't be allowed to cut personnel for fear of PR loss.

http://www.livemint.com/Money/pSXXCj...-worsened.html

[Vishal.R]

Originally Posted by Samurai

And still TCS won't be allowed to cut personnel for fear of PR loss.

Even if they are allowed, It may not help. Problem is not cost but revenue i.e less spending by clients. Also investors need to be prepared for less positive growth (but no negative growth) for Indian IT service Industry due to so many factors.

[rrsteer]

We are now in an era of development or living which is much more network oriented than it ever was. The economic theory maybe Keynesian, Hayekian, Austrian, Chicago-ian, Indian - just doesn't hold. It is almost ludicrous of investment banks or financial media or economists to predict recession. There are just so many events of so many different types that can take place and trigger an 'economic' collapse, without being based in economics in the first place.

I have found a good description for these economists, professors, financial gurus etc- Intellectual Yet Idiots (IYI).
Taken from here : https://medium.com/@nntaleb/the-inte...577#.4ycroksqb

[Samurai]

Originally Posted by Vishal.R

Problem is not cost but revenue i.e less spending by clients. Also investors need to be prepared for less positive growth (but no negative growth) for Indian IT service Industry due to so many factors.

I am somebody who has been dealing with customers who have cut spending since the 2008 crash. It has been the long time trend for medium/small size customers. Nobody in the customer facing roles can miss this.

This is the direct result of income inequality. Yes, we are used to this concept when it comes to individuals, but not enterprises. But now it can be applied to enterprises too.

Income inequality is a big deterrent to commerce. Take a billion dollar, and give:
1) $1000 each to a million people who are on minimum wage.
2) the whole $1B to a billionaire who already has $10B liquidity.

In the first case, virtually everyone will spend the $1000, circulating the money back into the economy. In the second case, most probably the billionaire won't increase his spending. His liquidity grows from $10B to $11B. That $1B goes out of circulation.

One of the most dangerous outcome of 2008 crash was that it killed the cash reserves, and therefore the spending confidence of lot of enterprises, especially medium to small enterprises. The spending by medium/small enterprises is very important because they keep the economy humming. Their revenue to spending ratio is much higher than huge/large companies. If you are wondering why, look back at the billion dollar example I gave earlier.

The above situation was also made worse by cloud computing. Prior to cloud computing, only large companies could afford product & services from large companies, except off-the-shelf products. A 10-person company could never buy product/services from a billion dollar company, except for off-the-shelf products. But cloud computing enabled SaaS/PaaS/IaaS, which has allowed huge companies to provide services to medium/small companies directly without middlemen. A 10 person company that earlier depended on a local IT shop for email setup and other hardware, can now replace it with Google Apps and AWS. Thus large companies now can target medium/small companies for a very competitive price thanks to the economy of scale they enjoy. The revenue previously enjoyed by medium/small companies, is now going to large companies.

In the past few years, IT commerce is moving steadily from smaller companies to larger companies. So the net spending is coming down.

Another aspect is the transaction value. Large buyer always pays less than small buyer. You can sell 100 apples at ₹50 each to 100 people. But you cannot sell the same 100 apples to a single buyer at that price. Volume discount will have to be offered.

Cloud services have also removed geographical barriers. If you are offering a service to a Bangalore company, your competitor won't be just local, they could be from anywhere from the world. Instead of competing with 3 local companies, you are now facing 50 competitors from literally everywhere. This puts further squeeze on the profit margins.

[srishiva]

Originally Posted by Samurai

I am somebody who has been dealing with customers who have cut spending since the 2008 crash. It has been the long time trend for medium/small size customers. Nobody in the customer facing roles can miss this.


The above situation was also made worse by cloud computing. Prior to cloud computing, only large companies could afford product & services from large companies, except off-the-shelf products. A 10-person company could never buy product/services from a billion dollar company, except for off-the-shelf products. But cloud computing enabled SaaS/PaaS/IaaS, which has allowed huge companies to provide services to medium/small companies directly without middlemen. A 10 person company that earlier depended on a local IT shop for email setup and other hardware, can now replace it with Google Apps and AWS. Thus large companies now can target medium/small companies for a very competitive price thanks to the economy of scale they enjoy. The revenue previously enjoyed by medium/small companies, is now going to large companies.

I.

I agree with the above paragraph but the converse is also true. I am working with small startups who are developing IoT devices with applications in the cloud. On deployment they can now charge a customer on per user basis since the infrastructure now comes from cloud and is scalable based on needs.

This might benefit the cloud providers but also brings in new startups with unique applications to not worry about setting up/selling infrastructure (except devices if required which are also procured through integration or contract) to other medium and small companies. Value addition is simpler and more profitable. Both don't have to worry about the investment and use cloud model. Ultimately its the applications that bring the moola.

[sgiitk]

Originally Posted by Samurai

And still TCS won't be allowed to cut personnel for fear of PR loss.

http://www.livemint.com/Money/pSXXCj...-worsened.html

I may add one point. We do not have any social security net. Given the socialistic history Hire and Fire has not yet entered our genes. I do not think we have any manpower shortage on paper, but those with the skills are still tough to find. So the reasons can be social as well as economic.

We need to start setting up a social security net. I think the NPS may be a step in this direction.

[Samurai]

The voices are only getting louder.

https://www.bloomberg.com/gadfly/art...o-grasp-future

http://www.huffingtonpost.in/2016/10...erent-kind-of/

[NetfreakBombay]

Interesting article on the Topic of IT Services Industry :

https://www.linkedin.com/pulse/pare-...rthik-sundaram

[Samurai]

Originally Posted by NetfreakBombay

Interesting article on the Topic of IT Services Industry :

https://www.linkedin.com/pulse/pare-...rthik-sundaram

Never seen somebody overdoing the metaphor so much as to ruin the message.

He tries to fit his solution to PARE to remain true to his avionics metaphor. It finally ends up like Deepka Chopra speech.

The looming crisis is real, but I am yet to see somebody suggest a realistic or practical answer. The following article offers a better direction, if not a solution.

http://factordaily.com/indian-it-dyi...er-tcs-infosys

[Samurai]

A huge shakeup in L&T... they are reporting this after shedding 14000 people.

http://economictimes.indiatimes.com/...w/55570052.cms