September, 2008

Message from TP-HOD


My Dear Students:

I interacted with you all before commencement of the placement season to share an overview of placements and my perceptions about prospects for the batch’09. I recall sharing that 2008-09 is not the best of years and that we need to play with adequate caution. In a globalized economy, I said, if US sneezes, we catch a cold. Since then, a lot of water has flown under the bridge and I felt an urgent need to share some of the current happenings – hence this message.

The US economy has gone from bad to worse; what is even worse is the fact that there is no sign of recovery. The next few lines are quotes of leading analysts.

“There are differing views on whether the situation would further deteriorate or would remain at the same level. Even if it remained at the same level, it is a distress situation. The sub-prime crisis is no longer confined to mortgage market, and has percolated to rest of the financial system” Dr.C.Rangarajan, former RBI, Governor.

Lehman, Merrill to pound weak job market – Headlines - “The resume flow will start like there is no tomorrow. This is seriously going to impact across the (wall) street and all over the world as well” Michael Karp, CEO, Options Group, New York.

No end to the crisis – Hindu Editorial - “The crisis has shaken the United States, and indeed the global financial system. The clear message is that the US financial sector crisis will take more time to dissipate”

The former Federal Reserve Chairman, Alan Greenspan, said the US was in a “once-in-a-century” financial crisis.

Even as I am writing this, I have got a report saying American International Group (AIG) and Washington Mutual are expected to go bust soon. 


So, what does all this mean to the batch’09?

  •      This is an election year both in the US and in India. With economy going from bad to worse, the outgoing Government is not in a position to implement turnaround actions. The US elections will be over by November’08 and the new Government will take at least 3 months to settle down and another 3 months for the effects of changes to be visible. That takes us to May’09 and that is time for you to leave the campus. If all goes well, the earliest time frame when economy can be expected to limp back to some kind of normalcy would be September’09.

  •        Loss of jobs in the Investment Banking and related sectors will have a backlash on our placements. Typically, these jobs flow in a value-chain sequence as follows - IIMs, then IITs/tier-2 B-schools, and then NITT / other NITs. When these jobs dry up, the IITs would start migrating back to regular Tech / software jobs thereby eating into our jobs. This combined with a bad US economy means less funding from Venture Capitalists (VCs) for typical industries like electronic design companies. (The work that happens in India is primarily what is called as fab-less i.e. design work or brain work  on which the VCs bet their money on, which is subsequently shipped to countries like Taiwan for fabrication – actual chip manufacture. Needless to mention that we are already witnessing a slow down in Tronic tech offers)

  •      Prospects of IT services jobs would also be less, as, in a bad economy, typically companies tend to put on the back burner all automation and computerization jobs as an immediate cost cutting measure to tide over the financial crisis. Hence, a significant drop in outsourced projects would be a natural outcome.

  •         The recent weakening of the Rupee against Dollar (Rs.46/ USD as on day) might be seen as a positive development for all export oriented industries (read IT..) as it is expected to lead to higher inflow in rupee terms. However, this is not so for the following reason - a few weeks / months back, when the Dollar was continuously weakening, most of the IT companies had hedged at around Rs42-43/USD. To put it in simple terms, this means that these companies cannot derive the full advantage of a strong Dollar. The natural outcome of this would be for companies to maximize project output while minimizing manpower costs in order to keep their neck out of troubled waters.

  •        With the churn that is happening in the market place, we will be better off, if we can tone down our expectations on managerial / techno-managerial profiles.

Having said all this, we are better off compared to many other campuses. The going has been tough so far but we have been going. The going could get tougher in the coming days. However, this does not mean that you lose your confidence and hit the panic button. Review your strengths and weaknesses and assess your standing and take a practical view. Your seniors are indeed a valuable source of information and often act as windows through which you see the world of industry. But then, also realize that it is a changed situation today. Last year this time, Jobs were chasing them. Today, the vector has changed direction.

With this back drop, take a more practical approach. Consult your peers, parents, brothers, sisters, seniors….. and make your decision; but finally remember the decision is yours and you need to own that decision.

Good luck.

Dr. A. K. Bakthavatsalam