Recession in Technology Industry

We know that the Industries worst  by the Global phenomenon of Recession are Aviation, Hospitality, Real Estate, Banking along with IT (Information Technology).

I will talk here of the Industry which was the starting Point of this Disease. The IT and ITES (Information Technology Enabled Services) Industry.

The World Economy gets hugely impacted by whatever happens in the USA. The reason being that around 20% of it is represented by the United States. That means the rest of the World's combined Economy is 80%. Hence, the World Economy gets affected by the happenings in US’ Economy. Needless to say, the problems in IT Industry and others too started in the US and later engulfed the whole World.

Earlier in 2008, when Recession had its first entered India, many Industries were getting affected by the Financial Crisis. But still, the IT Industry was immune to its effect and the general feeling was that though people will cut on other daily Expenses but will still buy Mobile Phones, Laptops, and other similar Gadgets. It was assumed that the Credit Crunch will not affect the Spending habits on Technology and related Products.

However, the Industry began to take a hit by the end of 2008. By then, Recession had enveloped almost everyone and the assumptions of people about the immunity of IT Industry to it were proved wrong. The Technology Industry was also not Recession-proof. Many big Names in the IT Space started losing a major Percentage of their Net Worth. The Shares were taking a 10-Year - 13-Year low hit and Companies began laying off many of their Workers.

Though some Firms who were good financially remained unaffected in the start, but by the middle of 2009, the situation was the same for everybody.

One major challenge for the IT Industry was the shortage of available Funding. Since the Banking Sector also came under the effect of Recession, the Funding of various Innovative ideas was halted. The Demand for basic IT Services was intact, but that for more developed Applications was coming down. IT and ITES Companies came under great Pressure to cut Costs, which they did by reducing Headcounts and by Infrastructure-sharing.

Many Clients began shelving many long-term Projects. More-and-more staff was on-desk which affected their monthly earnings. The Supply of IT Professionals was more in comparison to the Work available. In simple language, the Demand was less than the Supply which resulted in huge number of Job cuts.

Many Employees also started leaving the Companies and switched to Industries which were better Recession-resistant.

This situation was common and widespread in the IT Industry worldwide and was visible till the start of 2011 when things started looking up. But, again after two years, as 2013 is coming to an end, Recession is raising its Head.

We have a very good Example before us of the happenings in 2008 & thereafter. The Industry must learn from it and should build up ways to fight the coming Season of Recession in better ways. Hope this time when Recession strikes, we will not see many IT Professionals jobless.

Regards,

Pragya Banerjee
MBA (Finance); 7+ years of work experience
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