Originally posted by manish_okhade
Originally posted by tarkeshwar
Just a general comment - Most of the current software companies in India are just making use of the arbitrage opportunity arising out of the differential between salaries in India and USA. I don't see companies here innovating or building products. As with any arbitrage opportunity, the differential is going to shrink over time, whether it happens through competition (among Indian companies or from other countries), rising rupee, slowdown in US or increase in salaries in India. This is bound to happen. |
Here is my observation on this comment:
1) IT story is started by few firstcomers and they noted significant growth in initial phase due to cheap talaent availability and cost arbitrage
2)In 2nd phase, many others noticed this phenomenon and strted opening their own shops thus competitions comes into picture.
3) In 3rd phase competition led to salary hikes for talent poaching and salaries are still lower than US but reducing the cost arbitrage.
Now IT space is crowded and lost the purchasing power due to competition. All players can not continue to pay high salary and at the same time demand higher billing rates from customer. This will eventually lead to consolidation or many small players will be wiped out from the market. All big players have enough cash to buy small players and buying opportunity is good for them because it comes with new customer base.
Second possibility is the migration of work to new geos where cost arbitrage is still better than india but i am seeing there are issues like availability of abundant talent, process awareness etc. Hence above 1st possibility is very likely.
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Just want to add something related to competition.
I am in U.S for about 5 years and have worked in about 6 different companies during that period.
I have noticed that indian and chinese engineers make up for around 60% of total on an average in the companies where I worked, Inspite of the fact that they are minority here. As of now I am not able to find a single Engineer from Latin America and border country Mexico despite the fact that their population in US is many time more than Indians.
So who is going to compete. Only competition I see is china but the market is so big that both will eat the fruits luxuriously.
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