Yesterday, riots again broke out across Indian cities, causing Wal*Mart to delay the opening of its store

The going hasn’t been very good for Indian IT firms recently. First, there was the Satyam scandal which exposed many of the fundamental issues with Indian IT companies, corporate espionage, board level corruption, scamming of shareholders etc. Then, what was left of Satyam was to be taken over by a Government-appointed board, but there was a loss of customers and soon after came a significant drop in revenues for almost all major IT companies in India. But that wasn’t all, newly appointed US President, Barack Hussein Obama then pretty much declared war on outsourcing to India by making his now famous, “Say NO to Bangalore” speech. Obama’s war on Indian IT has led  NASSCOM to voice fears that, “[the] clouds are getting darker for Indian IT companies“, while the mainstream Indian press is proclaiming that, “Obama torpedoes Bangalore again“. Meanwhile, the anti-Indian outsourcing sentiment is growing in other parts of the world, including Australia.

During the last couple of years the increasing level of violence in India has also been a concern to outsourcers, and the most recent episode (just 2 days ago) of large scale protests that broke out in the Indian province of Punjab resulted in vehicles being set on fire and shops being gutted. Ultimately, the Army had to be called out, but not before one of America’s largest corporations, Wal*Mart, had already suffered at the hands of the rioters and decided to delay the opening of its store in India. These incidents, as the Times of India points out on its front page, put issues like India’s caste system, disparities and violence in the global spotlight, creating further challenges.

And finally, it’s no longer cheap to outsource to India. East European countries have been taking the lead recently and offer a safer environment, more educated workforce and geographical proximity to the US and Europe. To add to this, Wipro and other Indian outsourcers are warning that changes in US immigration law will lead to diminished business for them. Research analysts predict that the outsourcing industry in India has a “cloudy future“. Indeed, the stocks of all major Indian outsourcers have suffered as this report from India’s NDTV indicates:

Rioting breaks out in India on May 24th, 2009. Police baton charge rioters.

Outsourcing focussed IT stocks slumped on a firm rupee. India’s second largest software services exporter by sales Infosys plunged 4.48% [...]

India’s largest software services exporter by sales TCS lost 2.54% to Rs 650.30. The stock lost on reports Chrysler, the bankrupt US automaker, plans to scale down its offshore outsourcing of information technology projects to vendors such as TCS in the near term.

India’s third largest software services exporter by sales Wipro fell 2.61% [..]

One of the big issues facing Indian IT is that India has still not produced an internationally relevant, succesful software product company. Since they are not producing leveragable products, the global demand for IT “body shops” is what principally drives revenues for Indian companies. As this demand diminishes due to a variety of factors, including competition, increase in Indian government taxation, increasing violence in India and a US government hostile to Indian businesses, the prospects for the service based IT industry in India don’t look all that great. Let’s wait and see how this unfolds.

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More than a year after Pakistan announced the world’s largest WiMax network, India is following suit with a somewhat modest 200,000 user deployment. Tata group will be investing $500M over 3 years to build out a WiMax infrastructure primarily for commercial use. In Pakistan, the magnitude of WiMax adoption has been far more significant. Wateen and Mobilink, two of the largest private telecom companies in the country have built out massive networks designed for the use of the individual, SMBs and large corporate organizations. In order to support this infrastructure, three independent Fiber backbones have been laid throughout the country, PTCL’s, Wateen’s and Mobilink’s. Wateen’s WiMax network has been operating in Pakistan since the last several months.

Broadband penetration is fairly low in India, at about .2% (point 2 percent) of the population, but we hope this improves in the coming days. Many of Pakistan’s up and coming web content and services companies will find a market in India as relations between the two countries improve, and certainly, a greater number of broadband users in our neighbouring country will provide a larger market. Read on to see the original news story.

Tata Rolling Out Large WiMax Network in India
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By JOHN RIBEIRO, IDG News Service\Bangalore Bureau, IDG
Published: March 4, 2008

Tata Communications plans to connect 200,000 retail customers using WiMax by March 2009, the company said Tuesday.

The company, which is targeting both retail and enterprise customers, said that it plans to roll out WiMax in 110 cities for its enterprise customers and 15 cities for retail customers this year.

The company expects to invest US$500 million in this venture over the next three years, a company spokesman said.

India is relatively under-served in broadband Internet services, particularly for consumers. The country, with a population of 1.1 billion, had 3.24 million broadband subscribers at the end of January this year, according to the Telecom Regulatory Authority of India.

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