Dear All,
Azim Premji addresses his team
More than two centuries ago, the famous author, Charles Dickens described in the opening lines of his famous book, A Tale of Two Cities that 'it was the spring of hope, it was the winter of despair'.
That is how it looked a few months back. But events after events in the last few months, weeks and even days have begun to indicate that what appeared like a squeeze in the first half is threatening to become more of a bear hug as we go further.
According to some estimates, the present downturn is the worst since the Great Depression in 1930. It encompasses all sectors, not just IT and Telecom as it was in 2001, but all geographies including the US, Europe, Asia and Emerging economies, all asset classes including Real Estate, Oil, Metal and others and all sectors of the economy.
While the much touted disaster of derivatives of Lehman Brothers has been splashed all over the newspapers, the phase of downturn represents just the first of three phases. The second phase, which is shrinking real economy such as manufacturing will be next and the final phase will be of capital flows. Estimates indicate that the last phase is only 5% complete. Already over 100000 jobs are lost on Wall Street and in the US as a whole in Fiscal Year 2008 to date more than 600000 jobs are no longer there.
So how long will the winter of despair last? Nobody really knows but the estimates vary from 2 quarters to 2 years. In fact, one study of 113 downturns suggests that it may be as long as 3 years!
Yet, to continue with my opening quote, along with the winter of despair is the spring of hope.
Oil prices that had reached 140 USD are less than 75 USD. Estimates are that these prices will fall further.
Large economies have problems of productivity and demographically weak. Customers will face significant cost pressures and that could be a driver for more Outsourcing.
Companies that have large Offshore teams in countries such as India have less than half the population above the age of 30.
Technology will be a significant enabler of Productivity in developed economies with Solutions such as SAS and Cloud Technology.
What can we do as a company to weather the storm and make the most of the silver lining?
First, we must become absolutely Customer Centric. We must have a clear Solution that will help our Customer's business in these troubled times. Let us understand the business of our Customer so thoroughly that we can be seen as a partner of choice compared to our competition.
Second, let us stretch to the hilt. We have to squeeze out every ounce of productivity we can. Its no longer a question of working hard or working smart. It is both. In fact, those companies that work harder and smarter will survive.
Third, spend thriftily on capital expenditure. Make assets go as far as they can by increasing their use.
Fourth, cut down discretionary expense wherever possible. Every dollar or rupee saved is a dollar or rupee earned.
Fifth, at same time invest in the right opportunities. The best time to invest is always when things are at rock bottom. Look for opportunities in markets like India and Middle East .
Sixth, align people to business opportunities. Re-skill and right-skill to make this happen.
Seventh, we have to manage our risks. The fast changing environment also creates uncertainties for our customers, vendors, technology partners and service providers on whom we depend to create value for our stakeholders. We need to be watchful to ensure that we do not fail in our obligation because of their failure – we need to be vigilant and take swift but decisive actions.
You may have heard of the saying that the higher things go, the harder they fall. The reverse is also true. The harder the economy falls, the higher it has the potential to grow when things recover.
Only, it will not be easy for anyone but the best to survive in the meantime. Both organizations and employees have to put their best foot forward.
In his book, The Prize by Irving Wallace, he says that the blessed one is he, who, confronted with a crisis in his life is driven to call upon resources of the spirit, to use them to survive, even triumph over life itself. Everyone must know the supreme value of challenge, the eternal necessity to meet it and grow to fullest life.
Let us gear up and use all our energy and resourcefulness to triumph over this challenge.
CAclubindia
