Shrink N’ Squeeze In India

A few articles about problems in India’s IT industry are similar to what I’ve been saying about India’s VFX industry: Rising wages but stagnant quality.

Indian Outsourcing Companies Struggle to Keep up with Multinationals

The article mentions the rise in wages:

The truth, however, seems a bit more nuanced. The article touches on staff attrition, an issue that is becoming a growing concern for Cognizant and many of its Indian rivals. Cognizant’s CFO says the company plans to increase salaries by 12 percent to 14 percent this quarter.

and also the inability to compete for more complex work:

They have yet to prove that they can come upmarket, do the big complex work and build the industry experience at scale in a global environment.

the cheaper labor advantage is vanishing:

The runway for labor arbitrage benefits is just about gone.

Another article looks at India’s shrinking growth problem:

But new IT outsourcing activity in India has slowed. “India still has major market share,” Lewin says, “but the growth rate of new commercial deals between 2010 and 2011 shrunk by around 60 percent.”

Another common saying on my blog is In a race to the bottom the only ones left standing are biggest losers. India’s VFX industry has marketed itself as the go-to place for cheap VFX.

However, you can’t stay a bottom feeder for that long. Wages are rising and producers will go to other markets with cheaper labor. So now India needs to make that jump to the next level and there lies the problem: The quality is stagnant and as the articles above point out, the ability to do big complex work has yet to be proven even in India’s highly developed IT industry.

Say what you want about the California VFX industry but one thing we have never marketed ourselves as is cheap. We market ourselves on the ability to do big complex work high quality work.

Soldier On.

2 Responses to Shrink N’ Squeeze In India

  1. daland4vfx says:

    I am badgered at least once a week by vfx outsourcing companies in india, china, south america, etc. Last week one of these fine folks told me in order to keep pricing down they are outsourcing to Iran. At first I found it hard to believe, but then 15 years ago I wouldn’t think I’d be getting calls from India for outsourcing. Thanks for putting your personal the time into this blog.

    -david

  2. meh says:

    So the growth in the knowledge work economy is going to be in the west? The current re-balancing of the global economy shows that multi-nationals are investing in Asian growth potential instead.
    http://www.glassdoor.com/Salary/Infosys-India-Salaries-EI_IE7927.0,7_IL.8,13_IN115.htm
    Bill Gates Hails Software Lab in China
    http://english.peopledaily.com.cn/200210/16/eng20021016_105152.shtml
    Software Wars: China vs. India
    http://www.wired.com/techbiz/media/news/2002/04/51706
    etc.
    http://www.technicolorbeijing.com

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