'CIOs Must Improve Employee Productivity During Slowdown'

The world’s strongest economies are feeling the pinch of the slowdown and are making concerted efforts to counter this situation. The slowdown has had its effect on India as well, but not entirely. Keeping in mind the current and future scenario, Biztech2.0 caught up with Mayank Saxena, senior industry analyst, ICT Practice, Frost & Sullivan – South Asia & Middle East, to find out how CIOs should prepare themselves for this event.

Is the economic crisis mostly related to the credit crunch and lack in demand, or is there more to it?

Besides the credit crunch, the GDP growth rate has been estimated to be around 7- 8 percent in the current fiscal year. The Indian consumer is reluctant to spend during this time. The other major problem that India is facing is the decreasing value of the Indian rupee and the increase in inflation rates. These are some issues, which may affect the development of India Inc.

As the funds of Indian banks have not been utilised by investment banks in the US, this sector is stable. Irrespective of this, India shall face a temporary slowdown for the next few months.

In the present scenario, the US and Western Europe are regions, which are seriously affected by the economic crisis. The RBI and the Indian government are carefully monitoring the flow of credit and are trying to ensure that the additional liquidity in the system translates into actual credit.

How do you view the current economic crisis in relation to the IT spend?

Due to the lack of liquidity, the end users of any solution are expected to lay greater emphasis on cost reduction and efficiency. This year the relative expenditure on IT shall be lower, which will help balance out losses in other areas.

In the next few months, the financial sector will be especially conservative. It will withhold spending on new projects and delay expansion plans. On the contrary, they will try to leverage vendors’ expertise to rationalise operational costs.

Consumers shall expect greater flexibility and business value from vendors. They will also be focused on their risk management strategies and will consistently evaluate their exposure to various types of risks.

How can CIOs better respond to the current economic crisis?

The focus area for CIOs would be to look internally and work towards improving productivity of employees in order to remain competitive, rather than on increasing staff strength. They will move towards a non-linear business model, where the direct link between revenue and headcount growth is broken. Consolidation with other players is also expected to share the costs internally. Decision makers should partner in innovation and business transformation and give more than just IT services and products. For example, network equipment vendors like Cisco can provide financing to their partners to enable them to buy products.

Indian IT companies have been concentrating heavily on the financial services sector and the US market. With the recession, IT companies would be able to spread their reach in other sectors such as real estate and manufacturing and other potential markets like Middle East, Asia Pacific and Latin America. They shall also focus on domestic markets, which would be a crucial driver in the next few months. Outsourcing companies on the other hand are beneficiaries of this slowdown as it has helped in reduction of costs. The managers of IT/ITES companies should look forward to cashing in on this opportunity.