Surviving through the Great Depression of 2009

It was a century ago, 1907 to be exact, when a series of events related to
the financing of the copper industry led to the collapse of one of Americas
great financial institutionsthe Knickerbocker Trustone of the best trusts in
America. This collapse triggered off a chain of events that disrupted the world
of commerce and business for many years. And it was at that time when an
entrepreneur came up with a series of financial measures that would restore a
modicum of predictability to the financial sector in the years to come. And that
man was JP Morgan, and the institution he created remains one of the great
financial institutions to this day. It is sad to see that the very precept of
capitalism is being questioned because of some dubious financial instruments
clogging the environment. An admirable financial edifice that was built to
create free market economies in the Western world has developed cracks that may
take a few years to seal, and may well result in the complete reengineering of
the entire global financial services industry.

The implications for India are clearwe are no longer decoupled from the
global economy. All sectors, whether it is IT or BPO which are directly linked
to the fortunes of global business or retail; manufacturing and real estate that
depend on the prosperity of the citizens to succeed will need to gird themselves
for a period of uncertainty. Companies in the knowledge services business will
need to be watchful and avoid excessive cost or capacity build-up at a time when
demand will be weak, at least for the next few quarters. The industry will
certainly lose a few percentage points in growth in the next three or four
quarters though the better firms are already showing that they have what it
takes to keep their profits intact.

Every crisis creates new opportunities and there are new possibilities
emerging in every segment. Services firms have the opportunity to build wider
and deeper relationships with loyal clients, challenging the assumptions on what
work can be done in nearshore and offshore locations and identifying new areas
to partner to meet the customers need to preserve profits in difficult times.
Product and IP creating firms can identify niches that emerge through the
periods of instability and education and training firms can address the task of
re-skilling both the existing workforce and job seekers to make them more
suitable for the new challenges.

The opportunities for innovative startups to address discontinuities in
infrastructure, education and even new fields like embedded systems, mobile
applications, and SaaS and SOA are immense and a carefully thought through value
proposition validated by real customers can all take off even in the slowdown
year that 2009 definitely will turn out to be!

This is a structural recession that will take a few quarters to be sorted out
and gives the IT industry headaches to cope with a predictable slowing of
revenue growth by a few percentage points. But it also provides ample
opportunity to address issues that have been on the back burner for some time.
For my brethren in the IT and Business Services fraternity, let me remind you of
the remark that the current Chairman of JP Morgan made at the Harvard Centennial
event. He said the market still liked them in comparison with other financial
majors because "we suck less". It is all about comparative advantage in a tough
markethow well does your firm stand up in the current business scenario?