Thursday, March 20, 2008

End of Outsourcing to India

The goras are back and with a vengeance. After years of unchallenged dominance of India's software labor force, a small ripple in the Indian outsourcing business may soon become a massive tsunami. The days of outsourcing Indian talent appear to be ending.

This may not seem evident now, but with the falling US dollar, which has depreciated 12% since its peak in 2007, Indian salaries are not exactly competitive, and Indians demand higher increases than foreigners. Last year software professionals received a 15-18% annual pay hike in India, as compared to 4-5% in other countries.

Further, with the US economy slumping, Indian IT bigwigs are keen to swing in lucrative federal (or US government) contracts, which favor local talent. To compound this, there is a strong possibility of an anti-outsourcing Democrat president in the US.

All these factors are making Indian IT companies switch back to on-site services, albeit with a difference -- it is not the software programmer Andhra Pradesh, but a local from
Cincinnati, Ohio.

The red herring to this is TCS's new software development center in a suburb of Connecticut, Milford. The country's largest software exporter Tata Consultancy Services on Tuesday said it has set up a software development and delivery center in North America with a capacity of 1,000 seats to cater to the customers there.

"Most of them will be locally hired from the region and its universities," TCS emphasizes. The average salary would be $60,000 (EU38,000), and TCS will receive a 90% property tax break worth $15 million (EU9.5 million) over eight years to locate in Ohio.

This is not a new phenomenon, since companies like Infosys already have been practising this. Infosys's foreign campuses have at least 3% of local talent. Satyam too is planning on increasing its foreign centers although there are no numbers committed.

Facing a signficant downturn in the US economy, a growing number of IT employers believe hiring local talent reduces training costs as well as improves project execution. They say that locals are attuned with the cultural mileu and understand their region's businesses better.
This may in fact be a feeble justification for the slow ejection of Indian software labor.

Wednesday, March 19, 2008

Mumbai Real Estate Crashes 30% -- Finally!

Good news in this morning's newspapers. Both the DNA and the Times of India have reported a 30% crash in Mumbai's real estate market. The benchmark for this is the sale of commercial plots in the Bandra-Kurla Complex. Of course they won't say it like it is, but you do the math and you will understand why this is true.

Last year, in 2007, prices were at a staggering Rs 48,600 per sq. ft. paid by the Wadhwa Builders. The scenario changed yesterday; an empty auction hall wore a deserted look, with Jet Airways picking a plot for Rs 32,000 per sq. ft. Jet proposes to build its global headquarters in the area.

The drop of 30% went largely unreported, because the focus was on signals of the slump rather than the quantum. (Editors note!) This "30% drop" would have made one screaming headline.

Read the Times of India story here

Read the DNA story here (with a rather inappropriate title)

Tuesday, March 18, 2008

The 44th President of the United States of America

Despite the immense hype surrounding the US Democrat presidential campaigns, my prediction is that neither Obama or Clinton will be the president of the United States of America.

Through a series of extraordinary circumstances, the 44th president of the United States of America will be John McCain.

What makes it intriguing is the position of the numbers 4 and 8. This is usually considered an ominous combination so under McCain we could see more wars and turmoil.

It is know that the US is ruled by No. 4, since it was born on the 4th of July. The US elections are on November 4, 2008. He is fighting for presidency in his 71st (7+1=8) year. He is also aiming to be the 44th (4+4=8) president of the United states.

(This post is a marker to this prediction)




Consider how the crisis has unfolded over the past eighteen months. The proximate cause is to be found in the housing bubble or more exactly in the excesses of the subprime mortgage market. The longer a double-digit rise in house prices lasted, the more lax the lending practices became. In the end, people could borrow 100 percent of inflated house prices with no money down. Insiders referred to subprime loans as ninja loans—no income, no job, no questions asked. - George Soros in latest book

everything’s going up, there’s a feelgood factor and people tell each other how much their houses are going up at dinner parties,” says Professor Mark Stephens of York University’s Centre for Housing Policy. “Then the music stops, as it always does.”

year, Japan was a more attractive market to put money in. If you look at the US, we can now get an internal rate of return of 25% there, so why would anyone want to come to India?” - a senior executive at an international financial services group, who did not wish to be named.

people told us house prices never go down on a national level, and that there had never been a default of an investment-grade-rated mortgage bond, "Mortgage experts were too caught up." - John Paulson, trader, who bet against subprime market and made $15 billion.

most puzzling are the real-estate projects of Parsvnath. Just have a look at the Pride Asia project near Chandigarh. They are asking almost US $300K-$350 K dollars for 2 bed room apartments. They have Villas in this project that costs more than US $1.5 million dollars. It is true that some people in India have that kind of money in India. However most of their wealth is black money and that can not be used to buy these properties. Obviously, these projects have been launched keeping NRIs in mind. - Sanjeev, comment from another site

Desai, aka Bani, the star of Balalji Telefilms's soap, Kasam Se, has been house hunting for over a year. She had almost closed a 2-BHK deal last year for Rs 1.5 crore in a Oberoi Constructions' building located at Andheri, Mumbai, but when she went back to confirm it, she was asked to cough up Rs 2.61 crore. Since then, she is still house hunting. - Mumbai Mirror


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