How my mom is proud even during recession!

As the cliché goes, whenever the US sneezes, the world catches a cold. The most deadly Picornavirus affecting countries is “Recession”. This word I lately realized is more contageous to non-IT people than the IT businesses.

Back home it's a wave that everyone wants to be part of, and everyone wants to show they know. While it's often funny to listen to the weird misconceptions people have about recession, it gets irritating if it goes too far.

The familiar sentence is arguably one of the most frequently asked questions these days, losing only slightly to the even graver one is “did your company fire you?” IT and related topics have such a popular following here, most do not know what they are following, but just drift along to be ‘in evidence’.

I sat along mom to brief her through the definition & causes (thanks to much appreciated education my grandparents provided her, I never have to use lay-man language). I told her that recession is a decline in a country's gross domestic product (GDP) growth for two or more consecutive quarters of a year.

Why does it occur she asked and I told her it is when consumers lose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment.

I still saw lot of questions in mom’s expression. Is there anything you are worried about I asked her. “Yes will recession hit SPI” she asked. Coming to my rescue was the recruitment ad that company put up in one of the local papers here with punch line “When every one is firing we are hiring”. She was happy about the Mangalore operations SPI started. I remember Sid telling me that here in Mysore when parents are happy about a company they will not only make sure kids working there stay happy & focused but also put a word of mouth “Branding” about the company & why the budding engineers fresh out of college should start career there.

Next few days I saw mom discussing lot of aspects on recession & how SPI is sailing smooth. Never has she missed to portray SPI setting foot in Mangalore. How we are planning to double our size when other companies are talking about lay offs. Thanks to the confidence she has on SPI I don’t have to attend various ceremonies happening. She never forgets to reason out my absence in all the functions she attends & I miss by “she has lot of work”.

Medical Transcription, Mangalore & Mysore; ‘M’ is the buzz word at SPI these days VP announced. I have added “Mom” in the list too.

Future Trends in Retail Industry

Any business that sells goods to individual consumers is a retail establishment. Retail establishments are one of the largest industries in most parts of the world; in the United States, 12 percent of all jobs are involved in retail. This retail industry has changed a lot in the last two decades. It used to be comprised of a wealth of small, often family-operated shops, department stores, and shopping malls. Today, however, it is increasingly common to see people doing their shopping in large mass merchandise stores, specialty stores, or online.

Downturn in the global economy means that the future of retail industry will be shaky. Consumers are curbing their spending. Bargain shopping is emerging. Department stores are suffering a decrease in popularity. However strong companies are growing stronger, and the less competitive ones are being swallowed up in this bad economy. The retail industry has started using of CRM, consumer resource management and RFID, radio frequency identification. With CRM, companies started using the data collected about their customers to figure out and suggest other products that might interest them. RFID is being increasingly used to make supply chain management more efficient, since with RFID a company can precisely track their inventory, knowing when more of something is needed as well as how much. This is done by placing a small chip on the packaging of the item itself.

Recently it has been seen that e-retailers, online shopping are doing good comparatively than in-store. Another recent trend is lifestyle retailing, in which stores will sell both apparel and household items of the same style, i.e. Urban Outfitters. Ecologically friendly products are an emerging trend, with items are made through sustainable practices, are environmentally friendly, energy efficient, or “green” in other ways rising in popularity.

Impact of Recession on Indian IT - Part 3 (Final)

In the past articles, we looked at the root causes and the impacts of Recession. Let us now discuss the strategies that firms can use to control the severity:

Short term Strategies -
Flexible Approach: IT companies need to be flexible in their approach towards clients. Renegotiating Deals is one of the options: In the current scenario, IT companies can look forward to deals with sticky revenues. The deals can now be renegotiated at discounted billing rates but with longer time periods which can ensure strong cash flow pipeline. Operational Efficiency: IT companies need to improve overall operational efficiency. Cost cutting should be a regular exercise and not just one time effort when there is recession. One of the ways is by reducing operational cost like spending what is directly linked to productivity or business; reducing the number of live meetings and doing them online or via video conferences, delay wasteful expenditure, removing the frills like subsidized food etc.
Employee Change Management: Optimum resource utilization by reducing cost is one of the major challenges for the companies. Communication channels should be open. Apprehensions in terms of job loss, reduced salaries should be addressed by the top management. Gossip and rumors harm the productivity and demoralize employees.
Companies need to improve the motivation levels of employees. Linking productivity with compensation and introducing variable salary is one of the tried and tested ways to improve productivity. One can no longer take his/her job for granted. Use this as an opportunity to tighten recruitment and retention processes. However, instead of a complete stop to all recruitment, the IT industry should use this period for a meaningful introspection and a substantial realignment of its hiring and retention processes. Under the pressure to cut cost, companies are heavily resorting to laying off employee in large numbers. It is true that non performer should leave and the number of people on the bench should be reduced but instead of handing over pink slips to them, they should be asked to deliver. Reducing the salaries of employees by a certain percentage is also one of the options.
Tighten the Belt: Any company can shed 10% of its cost without any real pain. This is as good an opportunity as any to remind knowledge workers that 30% - 40% raise year after year is not the natural order of things.

Medium term-
Spread Risk: As of now, for most of the IT companies majority of their revenues come from US market, the dependency on one market should be reduced. They should spread the risk. Companies need to explore other markets including domestic markets. US accounts for about 60 percent of the total IT spending. They should explore other markets outside USA.
Diversification: Sway with the flow of the times. Instead of just focusing on company’s core competencies, provide services in the next best domain for which there is demand. Meanwhile companies should arm them with other emerging technologies which will reduce its dependency on a single product or service. Companies can look for product development if there is a demand for the product
Adopt open source software: In times when companies have to work under tight budget, the open source companies will have upper hand than closed source counterparts. Unix based systems shifting to more cost effective Linux Servers. These migrations will accelerate if corporate IT budgets are cut.
Risk-Sharing: When our US client is nervous and unwilling to invest, and so puts his own expansion plans on hold, the one thing vendors can do is propose something different than the tried and tested ‘time and materials’ or even ‘price for guaranteed volumes’ proposition. It may not be enough to point out that outsourcing will save him money – when he is contemplating 100% saving by not launching that expansion or change initiative at all. Participate in the growth of their clients. In current scenario, the clients are likely to expect overall solutions from vendors. Offer him a business proposition where we share risk - share in the upside (and downside) rather than simply get a fixed revenue and manage costs (which is all most Indian companies do, even the best of them)?. For instance, IT services company need to start offering customers a fee per user (customer’s customer) or royalty models rather than ’60 man-months to build this system’. If the client does well, we do well. Needless to say, it also means we have to learn how to assess the client’s prospects in his market and learn how to actually help him sell better in his markets. It means we will have to think like venture capitalists and investors rather than suppliers.
Business Processes: Need to take a re look at the business processes. This is the time to redefine and strengthen business processes. In recession times companies shy away from R&D, they are in a dilemma whether to invest or no. Hire black belt Six Sigma employees or encourage employees to go in for Six Sigma certifications which will streamline processes and reduce the overall cost. Studies indicate that companies save up to 30% cost by hiring black belt six sigma employees
Employee skill development: Address the skills shortage and train the resources into multi skills.This quiet period needs to be used to get the existing resource pool ready for the next big wave. Most programmers are too caught up in the daily tasks to catch up on the latest technical advances, and appreciate breakthroughs that will sweep the IT world. To address this gap, workshops and technical trainings to educate the workforce should be held at regular intervals. Similar sessions on soft-skills and cultural orientation programs should be conducted to make the people more customer-centric. Look for internal mechanism for soft skills training of employees. Invest in employee development. Employees can go in for certifications for skill enhancement which will help in personal and professional career growth. Look for internal mechanism for employee development like web based training. Change HR policies.

Long term Strategies:
Innovate: The Indian government and IT/BPO industry need to focus on moving up the value chain by cultivating deep and enduring innovation across three dimensions - a) Business model innovation; b) Knowledge innovation; and c) Ecosystem innovation. The innovation needs to be done in three areas that are connected to the information technology industry of India such as business models, ecosystems and knowledge. The trick is to innovate - not necessarily do different things, but do things differently. Create a culture of innovation.
Collaboration with the industry and academia: Create an environment for innovation that could be carried for a long time: The IT sector has to expand to other countries and tap new centers of emerging demand and expand not only in terms of quantity but also in terms of quality of its skilled labor by introducing appropriate changes in the system in collaboration with the industry and academia. This calls for a transformation of Business Process Outsourcing to Knowledge Process Outsourcing (KPO) units. Figures suggest that only 25 percent of the total graduates in India have employable 'production-worthy' skills.
Build Brands: One great business value of brands is that they are relatively immune to economy-wide downturns. The emotional hold they have on customers is such that they can make the customer forget their hard times when they buy them. Indian companies have stayed away from building brands abroad because it is enormously expensive to do so. But increasingly, it is within the reach of Indian companies today

SUMMARY:

This is indeed a tricky time for the Indian IT industry, but there's no real reason to panic. The IT guns showed great character and resilience during the years following the dot com bust. They are wise enough to read the signs and realize that change is in order. With a slight course correction and an unswerving view on the long-term, the India IT industry can emerge stronger and bigger.

Recession and Retail Industry

News headlines are highly depressing as the economic meltdown is adversely affecting the entire world. But still I read them, especially the news related to money market, retail industry, consumer behavior and various other related articles. It is a rough ride out there and a significant effect is on the retail industry.

There are lots of factors that affect, like consumers’ discretionary spending power is being sapped by higher energy & higher food costs and to beat it all there is job loss. It’s a trickle down effect impacting the retailers negatively. With the goal of maintaining their gross margins as it is critical to be in business, Retailers are cutting prices and limiting inventories. During the past when there was recession and when people cutback on spending, many companies came up with innovative ideas to remain in business and maintain gross margins. To name a few ideas -retailers introduced rebates and discount commissions, banks introduced interests on checking or current accounts, supermarkets & departments began accepting credit cards to encourage people buy and spend money. All were appropriate offers for the times. These offers are still good and have survived beyond the recession times. The companies that invented and employed these recessionary response strategies fared well.

Today, the government’s stimulus funds may help the industry but the retailers should do well to acknowledge the recessionary state of mind, and figure out the best way to respond to it. When money is moving freely, retailers don't have to be all that creative to get their share of it. But when money is slow flowing, it's not enough to just show up. History shows that the retailers who survive economic setbacks are the ones who get inventive, get resourceful, and get noticed. In one of the news paper articles it stated that car sales will slow down. but it’s true that car sales aren't going to stop altogether in tough economic times. Toyota understands that, and is positioning itself not only to be the "official car of the 2009 recession," but also on maintaining its global domination afterwards. First, it is focusing on being accessible with hybrid and ultra-compact vehicles that people will want to buy now, and keep in the future. Second, it is focusing on being affordable by involving suppliers in the design process to save an estimated $10 billion. Third, it is focusing on being cooperative by giving free efficiency consulting to its own suppliers. The suppliers cut costs, pass the savings onto Toyota, who can, in turn, give its customers a break. This is one of the best examples to get creative and innovative to remain in business. I believe that the best place for everyone to focus is on supply chain strategies, for the right retailers; today is a time of great opportunity to eliminate redundancy and increase efficiencies in operations to make profit. Make your supply chain more “Collaborative” “Responsive” & “Agile”

More to come on supply chain strategies,…….

Impact of Recession on Indian IT Industry - Part 2

Impact of the crisis on IT Industry:

1. Reduced Revenues: Reduced demand for IT services and products in overseas market has reduced profit margins of IT companies
2. Reduced cash flow: Delayed payments from clients have reduced cash flow availability for the companies. This has resulted into deferred spending decisions of the companies. The end result in change in consumer behavior thus trickling the effect to other sectors of the economy
3. Profitability under pressure from all sides: Profitability is under pressure from all sides both vendors and clients
4.Access to Financing: Banks are reluctant to lend money thus further reducing the spending/investing capability of organizations and delay in any investments what so ever
5. Manpower Resources: Reduced revenues and profit margins have forced companies to go into cost cutting including layoffs, salary reduction, job insecurity etc

Challenges for IT Industry :

1. Maintaining Productivity: One of the major challenges for the Information technology industry is to maintain its excellent performance standards.
2. Reduced Revenues: Reduced demand for IT services has reduced their profit margins.
3. Low Cost Advantage: This has been the biggest USP of Indian IT industry but it can no longer take solace in low cost advantage. With stiff competition from new emerging markets like China, Philippines, Korea it may not remain its USP for long. Though low cost advantage is very important at this stage but the organizations need to offer more value for money and not just low cost. Other markets like China, Philippines are going to be strong contenders in future. The challenge now is how to maintain this low cost advantage in turbulent times without compromising on the quality.
4. Resource Utilization: Improving productivity and optimum resource utilization is the biggest challenge for IT industry. The dual challenge before IT companies is to improve productivity on the one hand and reducing operating costs on the other.
5. Employee Change Management: IT Employees are going through a turbulent times psychologically with the sword of lay- offs and salary cuts hanging above their necks all the times.

To be continued...