Yes you read it right I am calling this trio and their thousands of offshoots “The Axis of Evil” for Indian Software and Start-up space. While it is well known how these companies started the IT revolution in India with an interesting business model “Body Shopping” and post US clamping on H1 visas “Offshore Outsourcing”. The Indian software outsourcing story started off as a great business of labour arbitrage has today left most of its players scrambling for margins and why?

Because of their own inefficiencies they have created a beast which is now unmanageable. Think about it - the Indian IT employee has got an average salary hike of about 20% year on year which means in the last decade salaries have gone up 5x and attrition is on a all time high. Which means after all the salary hike, free lunch, fancy office buildings and over-pampering of employees, keeping them on “bench” for years?

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They have created a new breed of employees which I call the “OutBots“. These OutBots have been programmed not to think and blindly follow a process which is designed not to do a thing in a more efficient way but in a manner than the company can clock the most hours and bill the client without giving the client a feeling that he is taken for a ride.

Ask any of your friends in any of these companies and you would know how they have made an art “how many programmers do you need to replace a light bulb?”

Most of these companies run on a cost plus business model therefore as an investors what you see is that they are always making money and good margin - but you are missing what they have been loosing and the harm they are doing to the country by creating these “OutBots”.
Leaving few exceptions, most of the companies as part of “The Axis of Evil” are happy to build routers & software for large US based companies for a flat hourly rate but dont want to take a slightest amount of risk which could have transformed them into a “UT Starcom”, “Huawei” , “Lenovo” but are happy to remain outsourced partners to “Miscrosoft”, “Nokia” and “GE” who are making billions on the technology which is built by our “Outbots”.

So bad has been the impact on the start-up space that it is difficult for start-ups to hire quality employees as most prefer to be “Outbots” and for the few who do join are constantly lured by other “Outbots” for the referral amount paid by their companies to get more recruits. So bad is the situation that I once had an employee all of 23 years old come to me and said “he wanted to resign because he is putting 10 hrs a day at this job while his other friends are on bench, go to office play table tennis and make more money than him”. I had no words ..

I hope to start a debate on this important issue and would encourage everyone who wants to have the next Google and Facebook to come out of India to spread the word around and increase awareness amongst investors, entrepreneurs, students, shareholders and employees that how the “Outbots” will eventually self-destruct our software services industry and the only way out is to encourage Products, Innovation and fight “The Axis of Evil”.

Think about this - Venture Capital and Start-up investment in the software services space has dried up! Will the SENSEX and NASDAQ follow the same trend?
Share your opinion.
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