I lived thru’ the whole cycle working in a major Telecom equipment manufacturer. I saw how outsourcing stated and where it is today. In my company there are certain functions that are 70% outsourced now, which were all done by US based employees in 1999.

INFY and other Indian IT exporters are a good example of making the most of an opportunity. They were able to do it because of the huge pool of talented people that they can draw upon.

I disagree. The real reason is availability of large manpower to do this kind of work. Eastern Europe has several locations cheaper than india but no one can assemble large teams there. On the other side so far india has not had a skype coming out of there, this is where eastern european companies are taking advantage of. Y2K was mostly a sham operation. I worked for a company which was forced to hire outside consultants so that it can get a government approved Y2k seal of approval, ow some moron(or criminal as he may have been bribed) refused to budge, without that selling this hw to government entitiy was out of the question Our software was time dependent but not date dependent and it did not have an OS, it was a self contained state machine, yet he refused to have a separate category, so the boss decided to find a cheapest consultant to sit and drink soda and sign off that there is no Y2k bug.

I hope you have heared of a phenomenon called Y2K. It was once in a lifetime thing that did so many changes that its hard to list here. – 1991 forex crisis in India and famous then Finance Minister Manmohan Singh’s (and PV Narsimharao at PM) opening up of the economy with the move to make Rupee partially convertible … Focus on exports to get Forex situation under control ….

All of these events matter, but over riding all is Y2K and the internet bubble.

BTW Rupee is still not fully convertible.

In 1981 (infy start) and 1991 the exchange rates (INR/USD) were 9.1 and 23 rupees per US dollar. So according to your theory by weakening the currency successively IT exports should have exploded all the way to 1994. In fact the exchange rate was 43 INR/USD in 1999. Which is pretty much what it is right now ~ 45 INR/USD. Yet, look at IT exports from 1981 to 1999 and from 1999 to 2006, the respective currency devaluations of (43/9.1) ~ 80% devaluation and 44/43 ~ no change. Another reason which has been mentioned is the salaries of employees. The major component of IT companies’ cost is salaries. Take a look at salary increases between 1994 and 2006 and you can see the minimal impact a 50% weakening is going to have on margins. Salaries at the bottom level have increased by a factor of three and in middle management they are approaching 10-20X increases (anecdotal). Heck people these days have a 30% increase in salary in 1 year.

??? Is infy forcing them to do that job…The individuals involved choose to do that. They r free to find another career if they routinely find that they need to take there work into weekends… without knowing individual its a hard thing to say but quite often if that individual is struggling its their inability to not perform in that environment. Maybe your buddies shouldnt work at that kind of job. There may be other companies where they can be more productive and have a life.

Is that your reaction or their account of what is happening? Infosys stopped recruitment advertising a while ago. They receive a zillion applications of which about 2% get hired. It’s an open job market. Pathetic.

2> The profit margin Infosys is making has less to with the exchange rate and more with the cost of labor in India and plain economics. Just because exchange rate was USD 1 = INR 35 many years back does not mean much. If that was the case then India would be exporting everything rather than importing stuff. In case you read basic economics, it will tell you that demand and supply would decide what is the exchange rate. We are not a managed exchange rate economy like China.

Cheers