Tuesday, January 06, 2009

Buy, buy captives?

Though it is early to comment if this is a trend or not, it does seem like the Indian (or non Indian) IT service companies may be having the last laugh, for now. But in this game of global musical chairs or should it be global musical millstones - the person who holds the trophy may well have a Pyrrhic victory.

My worry? Overall demand is going down. When demand goes down, lesser people are required and though most IT solutions are scalable in both directions, it does not require a genius to figure out that overall IT requirement could go down too. In the short run, it is a good bet, in the slightly longer run, until there is more work coming this way, perhaps not. So, while this is a contrarian strategy to buy when the market is not so hot, but like in the past most of the industry is thinking like each other. There are other factors - like increased regulations which could call for increased reporting, better systems etc.

So, in the short run, this is a smart way to bulk up capacity, but who knows if this is cheap incandescent bulbs in a coming age of CFL/LEDs?

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