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Why Indian techies can laugh away slowdown fears?

 

fter five years of steep growth, the US economy is showing signs of pleatuing. It began with the news of dotbombs, which send investor confidence plummeting Gradually, more reports began to filter in, reaching a crescendo, as a parade of companies (stars of recent times being Lucent and Motorola) admitted slowing growth rates, lower than estimated profits and axed jobs to rein in expenditure. In January the Commerce Department reported that growth had dipped to 1.4 per cent annual and gross domestic product increased at only 2.2 per cent, down sharply grom a 5.6 rate in 2000 spring. The shakeout sent tremors down the US economy, forcing Federal Reserve to resort to aggressive cuts in interest rates twice in January in an effort to kick-start the economy. The meltdown in ICE stocks, the flurry of job cuts is now sending chills down jobseekers’ back, especially the India techie, who as an H-1B holder, constitutes the backbone of the US tech sector. What are the real implications of the slowdown? Does it mean that tech will no longer boom, meaning job cuts and layoffs for H-1B workers, or is a corrective force at work in the US economy weeding out the flotsam before tech can bloom again. AssureConsulting.com investigates and finds though notable cuts have taken place among the B2C sector, core tech sector has remained largely untouched. Unemployment rates continue to be the low in the US, companies are still clamouring for skilled Indian techies, (who we humbly assume have not faked their resumes). To top this, the tech industry is now diversifying into newer areas, meaning jobs galore! Read on to know more...

B2C companies used cyber space to experiment with futuristic dreamscapes impractical ideas and fantastic revenue models. Business imitated art, echoing the modern and postmodern artist’s passion: innovation for innovation’s sake

The euphoria that fuelled the Nasdaq and, to a lesser degree, the Dow Jones industrial average was based on the technology mania, particularly the dot-com game failed to live up to its hype, claiming thousands of jobs. In the last couple of months, a slew of once invincible dotcoms like etoys.com boo.com, pets.com, stamps.com, drugstore.com egreetings.com, have either cut costs, axed jobs to maintain revenues or closed shop. (See WSJ Comprehensive list). So far, this year 40 Internet companies have shut down, and according to a report published by Red Herring 211 public companies are trading at an 80 per cent of their 52-week high. One has to merely visit fuckedcompany.com a daily doom’s day prediction site for dotcoms, to learn the extent of the damage caused by the bubble-headed ballyhooing over the B2C economy. Backed by VCs, flush with funds, high on high-flautin titles, plush offices, inflated salaries, bloated perks, limitless e-sops, the new breed of netpreneurs suspended the old tried and tested dictum of the capitalist economy: the fiscally fit and lean will survive.

These B2C companies used cyber space to experiment with futuristic dreamscapes impractical ideas and fantastic revenue models. Business imitated art, echoing the modern and postmodern artist’s passion: innovation for innovation’s sake. For instance, companies like Priceline.com, an online grocery store, gave free rein to consumers to bid for groceries at the lowest price, expecting advertisements to subsidise the massive discounts on products, free services and goodies. Another internet company whose valuations were completely out of stock with reality was Drugstore.com, which laid off 60 employees in October 2000 and whose shares in the first week of February were trading at $3 after a high of $55. Drugstore.com found it was tougher than it looked to convince clients to order their prescriptions online. A patient was not likely to wait for two days for medicines to be delivered. Now, Drugstore.com has essentially become the online presence for Rite Aid, which was trying to figure out how to expand on the Internet. People can order online at Drugstore.com and then pick up their order at their local store. Not exactly the stuff of revolutions, but by aligning clicks with bricks Drugstore.com hopes to fare better.

Others like etoys are simply closing shop. Launched in October 1997 by founder Edward "Toby" Len, toys was one of the early e-commerce success stories and grew quickly to dominate the Internet toy store business with a reputation for strong customer service and an innovative Web site. The company raised about $477 million altogether, and plowed large portions of that money into advertising and building warehouses. But in the first week of February 2000, the company, which had been ailing for quite some time, announced it was closing shop. E-toys spent phenomenal amounts in advertising its brand and warehousing but failed to rake in adequate moolah. “The company,” says Sean Kaldor, vice president of e-commerce at Nielsen//NetRatings, never generated enough revenue to cover their spending.

Today, the market is looking for profitability rather than growth. P2P Path to profitability has replaced B2C. This became evident in the last quarter of the year 2000 as VCs realised that eyeball and click model would not translate into revenue. "The Internet can only change the capacity of the medium not become the medium," says Red Herring chief Jason Pontin. VCs are beginning to realise this. According to National Venture Capital Association of USA, VC investments declined to $19.6 billion down from $28.3 billion in the previous quarter. The closures have tempered market optimism and euphoria, sparking fears of a downturn and recession in the US economy. But as B2C companies come under the purview of technology- related and not core technology areas, techies have by and large remained unaffected. Most of the job cuts affected low-end programers or the warehousing, marketing and advertising segment.

Unemployment rates in the Bay Area continue to hover around two per cent. The national average is still 4.2 per cent, 0.2 per cent higher than last year but still the lowest in many years.

Just as VCs are becoming selective and plugging out of unprofitable dotcoms and channelising funds into core technology areas, may tech titans are relocating operations and manufacturing bases, fuelling fear of lay offs. Today, the US is no longer being viewed as the manufacturing Eldorado and is feeling the pinch of globalisation. High manufacturing costs have forced many companies to shift base from the US to cheaper production centres to achieve economies of scale and maintain volumes. For instance, Motorola recently woke up to the the cost-effectiveness of outsourcing operations and decided to shut its cell phone manufacturing unit, a decision that would affect 2,500 assembly-line workers and not techies. Leif Soderberg, senior vice president of strategy for Motorola's personal communications division commented: "This is not in reaction to any recent market change nor any kind of reassessment of our situation, but part of the long-term plan in terms of making the cell operations competitive." Similarly, Nokia cut 800 jobs, and is shifting manufacturing operations to low cost centers in Korea and Brazil. Sweden-based Ericsson recently quit the cellphone business unit and handed is production headaches to Flexitronics, a Singapore-based company with an office in San Jose. To quote Ericcson’s Kurt Hellstrom: "In the light of current market dynamics, we have taken a fundamental look at how we run the consumer business and we have decided to completely outsource supply and production of mobile phones he said." 

In the spurt of layoffs, techies have, by and large, remained untouched. Motorola continues to operate its research and development unit in the US and has retained techies working on developing the next generation digital phone. This is true not only of Motorola. Last month, Lucent cut 10,000 jobs. The job cuts have been affected to primarily reduce duplicated marketing, sales and administrative jobs; the company intends to continue to hire workers in high-growth areas of its business. Similarly, Hewlett Packard stated it was cutting 2 per cent of the work force to streamlining operations in the marketing sector. Chief Executive Carly Fiorina in a press conference said: "Basically, we are completely restructuring the marketing organisation across the world in H-P. The job cuts are unrelated to macro-economic problems and the employees will have the option such as applying for other jobs within the company."

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These are not hollow claims. Unemployment rates in the Bay Area continue to hover around two per cent. The national average is still 4.2 per cent, 0.2 per cent higher than last year but still the lowest in many years. Analysts state that the dotcom shakeout has impacted technology workers possessing low-end programming skills needed to run pure Internet companies. But the technocracy need not fear, as companies continue to face an acute shortage of trained and skilled workforce. A study conducted by then American Management states "Many companies are desperately seeking employees to fill other positions, most of them in the technology area. In a survey released last week, a record number of companies reported difficulty filling some positions, while planning to eliminate others. It was this shortage that forced tech companies to jockey for an increase in the number of H-1B visa form 65,000 to 1,85,000 for the next three years. Indian techies looking westward and possessing high-end skills have nothing to fear. Says Ramnath, a senior software engineer, with a reputed US-based multinational in Utah," the flurry of layoffs have not affected techworkers. Moreover, in the US, it is easy to shift streams and there is no stigma attached to being laid off. There is no shortage of jobs for techies who are confident of their skill sets and are willing to upgrade skills whenever required." Ramnath’s views are echoed by Margaret Steen a career columnist with siliconvalley.com: "In today’s market skills are a ticket to job security, "If your skills are current, you'll be less likely to be laid off, you'll be in a better position to get the assignments and compensation you want from your current employer, or to find another employer if you aren't happy." One has to merely read jobs advertised in the daily paper and log on to career sites like AssureConsulting.com to know that the demand for Indian techies working in high-end technology areas such as optic networking, embedded telecom systems, Real Chip design, Java + EJB, XML, C and C+ is particularly high. In addition, as more and more companies fight the spin off effects of the dotcom shakeout and strive for fiscal fitness, they prefer to hire Indian techies who are less demanding than their White counterparts and have higher commitment levels.

Even as the US economy comes to terms with the dotcom shakeout, capital is finding its way to new tech areas. The sector is humongous and technology is constantly upgrading itself. Fortune magazine in its December issue predicted that optic networking would be a $ 3 trillion industry. According to another survey conducted by Deloitte & Touche LLP a North-California based tax and consulting firm in January among 132 VCs: 89 per cent said biotechnology would see as many or more deals in 2001 than in 2000, 77 per cent expected as many or more deals in network hardware/software, and 69 per cent predicted the same for wireless and telecommunications companies. Enterprise software will see as many or more transactions in 2001 than as in 2000, said 65 per cent of respondents. But 66 per cent of participants predicted that Internet/mobile commerce deals would drop.

The slowing of the US economy does not signify that the Indian techie is down and under. Indian techies must learn how to tap US fears of as slowing economy to their advantage. In the US job market, Indian techies have pitched their skills at very competitive rates and offer an enormous cost advantage to companies. Its time Indian techies fired by dollar dreams wake up to this….

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