July 2006

Is Y2K the catalyst that put India on the map?

If one looks at the revenue trend charts for the major Indian IT companies, there is no doubt that the revenue jumped dramatically in the 1997-2001 period. Infosys which is over 2 Billion USD in revenue in 2006 had only 121 million USD in revenue in 1999. It grew its revenue almost 16 times over 6 years.

We attribute this to the Y2K issue during this time, the demand in the market and shortage of engineers drove some US businesses to look overseas for surplus labour. Remember the days when Indian/Chinese engineers were brought into the US on visas because there were not enough engineers to meet demand? What was not covered extensively was the fact that some US companies were also offshore outsourcing at the time. There were not a lot, but it was enough to give some IT firms in India the credibility they needed to enter the US market.

After Y2K some tech companies in the US disappeared, the downturn in the tech market made cost and marketing the number one issue in the North American market. The rise of the call center (inbound & outbound) , the rise of outsourcing back office work, and the establishment of India as an outsourcing center entered into a new era in 2001.

One cannot market on low cost alone, several factors came into play. If cost is the reason for India's rise why has Brazil not risen as fast?

1. Indians speak English----with a heavy accent but it looks to be getting better.

2. They have the educational institutions to train engineers and many were educated in the US or worked in the US

3. The government liberalized the market--reducing regulations and compliance issues in the 1990's. read more

4. Indian IT firms and engineers were in the US market at a critical time (1997-2001) and established their credibility.

There is a paradox in the US and Canada, we give new immigrants a hard time when they try to get into their professional field by asking them to re-write their professional exams in Canada, but then we turn around and outsource to Asian companies who employee these professionals in their own country.