Who took the jam out of your doughnut?

Part I - The laggard Indian Domestic IT Market

First, I must mention something about Hashbrown Systems, for search engine optimization and content marketing purposes, I was told it was a nice practice to follow, and follow just that I did.

Hashbrown Systems survived five tough long years and one not so tough in the Indian market, primarily catering to the Indian clientele. Along the way, we created some wonderful products that are getting accepted by relevant industries. That is the good part, for us, for now.

But if we have to ply our business in the domestic IT sector, we must know the extent of our market. We must look beyond the glorification of penetration of Internet in India and by extension the growing number of Internet users.

Let’s take a look at the numbers that are peddled by various sources.

Internet users in India are expected to increase from 481 million as of December 2017 to 829 million by 2021.

If you look at the graph and the numbers that is a huge market to serve to.

As per NASSCOM, the internet industry in India is likely to double to reach US$ 250 billion by 2020, growing to 7.5 per cent of Gross Domestic Product (GDP). The number of internet users in India is expected to reach 730 million by 2020, supported by fast adoption of digital technology,

That is a big number.

Let’s look at Domestic Indian IT Industry.

Good numbers showing good growth and great future for companies working in Domestic Indian IT sector.

Growth, Growth & serious Growth

Now, let’s take a look at the market size for export.

When you compare the last three years of IT services Domestic vs Export, you arrive at the following picture.

The domestic Indian IT Services market is laggard.

This poses lots of challenges to business such as our that operate primarily in the domestic IT space.

Let’s take a cursory look at some of the macro challenges thrown by Indian IT Market:

Human Resource Challenges

As my experience at Hashbrown Systems dictates, the big IT firms corner major chunk of the talent pool to the point that can be termed as borderline hoarding. This creates artificial scarcity and the cost of hiring such talent.

Another lamentable aspect is that bigger Indian IT companies are heavily subsidized by various governments’ largesse in terms of throwaway (read free) prices for land, tax-benefits and thereby providing protection from market forces that dictate prices.

Smaller Market, Higher Price

If you are an Indian provider of IT services to Indian market and not funded or backed by a venture capitalist firm, it is very likely you shall not find a foosball or tennis table in the office. The cafeteria would seldom serve coffee and the operating margins would be lesser than that of Ladyboys of Bangkok.

In real terms, most of the Indian Software market is supported by pirated software. A 2016 study by Business Software Alliance pegs the use of unlicensed software in India at 58%.

Well, the 41 Billion US$ market is less than half the actual size, and worse this is not a problem of intent but negligence and vendor connivance.

Market of owners, not renters

Indian businesses prefer to own. Not until recently they owned the labor force and their women and children and old habits die hard. This is a difficult mindset to change and as an Indian businessman myself, we see nothing wrong with it.

If someone is okay with way things are, they are okay with way things are.

The problem is those users and organizations are touted as the next wave of IT consumers, which simply put, they are not. Their attitude towards IT modernization could be summed up like this,

Social Media, Yes. Enterprise Software, No.

These are but few of the obstacles faced by Indian IT companies.

The concluding thoughts remain the same. The Indian domestic IT market is small, miniscule if you look at the sheer size of the economy. Whatever market there is, is oversaturated and almost everyone is scraping the bottom of the barrel.

Now, a question arises that must be answered, is it all that bad?

… to be continued