Why one say “No” to IT start-ups?

I have personally interviewed a lot of students and asked them why they do not want to join a start-up or SME. I have even asked many IT professionals why they always prefer joining IT MNCs and not SMEs/start-ups.

I will not elaborate much on this, but just in brief would want to share with you the reasons for someone not joining a start-up.

80% of the candidates feel start-ups (1-7 employees) are more interested in “Profit Maximization” rather than “Wealth Maximization”. Hence they feel in secured. Few of the candidates say that start-ups need to be professional (not casual). Some of them feel that start-ups are not “stable” in nature. There are even cases when candidates do not prefer joining a start-up because of peer pressure of the society.  So all these negativity spreads via word of mouth and goes viral, almost like a grapevine,  because of which a candidate does not dare to take the “risk” of joining start-ups (No, I am not blaming the candidate for not taking the risk).

Let me assume 80% start-ups are ambitious, they have a future plan, they are working ethically and are thriving hard to achieve something. But may be out them one player has caused a problem, ill treated a candidate or did something unethical, which in turn spoiled the brand name of the entire IT start-up community.  

Branding does not come by building a glossy website or having a presence in social media. Branding should be an “in-ward – out” approach.  Branding is an evolutionary process and fragile in nature.  So next time if you are not getting any resource to work for your start-up, do not blame the candidate. Let us accept our mistakes (if we have done any) and correct them, minimize the problems as much as possible and let us hold hands to build a strong IT start-up community.

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“Great Indian IT Product Story” – what is stopping us?

I am sure my friends from the IT community will be able to relate to this. I have read a number of articles and have heard many people giving their insights on this topic. Some will say ecosystem matters a lot and start blaming the government and the state, some will allege “skills are missing”(some will state India produces less PhDs compared to other countries) , and some will say “they need proper funding”.

Let me not get into all these for the time being but, let all of us for sometime start thinking from a different angle.

To start with I want to make a simple statement “You don’t need to invent, rather innovate”

It is completely wrong to say India do not have products (IT products are not included here). Let me give you some examples of products, which are built on Indian innovations and are now slowly moving into world markets (developed countries) – a) Ford, Toyota want to sell their India designed low cost cars globally b) Maggi noodles – a low cost and high nutrient product of Nestle which have been primarily developed for India is on its way to Australia and New Zealand c) General Electric’s low cost versions of ECG and ultrasound machines primarily for Indian markets are now moving to world markets d) Pepsi’s – Kurkure and Nimbooz e)  McDonald’s Aloo Tikki Burger. The list can go on. All these products are “innovated –in-India” and then slowly are moving towards the global markets.

So how such innovations (non-IT) are possible? Why cannot the same happen for our own IT Industry?

If you analyse carefully – traditionally products were designed in developed markets and adapted by the rest of the world. Technology came first followed by price. But what is happening now and will continue to happen is called “reverse innovation” that is low-cost but high value products being developed primarily for emerging markets (like India), which will eventually graduate to the developing world. Now technology is tailor-made keeping cost in mind.

Now back to the IT Industry. Indian IT companies (start-ups and SMEs) are unable to build a product on Indian innovation and then scale up globally. But MNCs or foreign companies have been building products (example many MS products are build from India development centre, many small start-ups in India are working on product development, which have been outsourced to India) How is it is happening? In my opinion “Cost” is a major factor. I totally do not agree with the fact that “we do not have ideas”, we do have ideas but the “cost of execution” and “scaling it up” is a hindrance to this.

By the year 2020, total IT addressable market (NASSCOM-McKinsey Report- Prospective 2020) from new geographies – BRIC region (Brasil, Russia, India, China) will be around USD 380-420 billion ( For India – USD 90-100 billion). That means we will see a lot of IT Innovations happening in Indian Markets. But the question is can our IT start-ups/SMEs do it? US IT Companies can achieve their growth, build products and reduce cost by outsourcing it to India but how can we (Indian IT start-ups/SMEs) innovate? – outsource (how? and to whom?) or focus on our frugal engineering skills (Jugaad)?

Because of these numerous questions I sometimes see a bad dream quite often – Re-birth of East India Company .

For how long will your job stay?

I know this a scary question but let us face it for once. I have been doing an analytic study on this for a long time and telling it to many people from our IT sector. Better we understand this now or it will be too late.

I have already stated one very important point in my previous blog post that “IT professionals” constitute 85% of the IT community. (Not taking into consideration the entrepreneurs/business promoters for the time being). The majority of our daily work (technology services or business services) is done by these IT Professionals. The “work” is given to us (India) primarily because of low cost arbitrage. That does not denote work only comes to India because of fairly low cost. The skilled resources (IT professionals) are affordable that is the primary reason why work comes here. This is a true fact and let us accepts it.

For a company there are two kind of costs:

  • a) cost of resource
  • b) other costs – infrastructure cost, various kinds of taxes etc.

Cost of resource is the primarily cost factor (80%) and if it increases work may not come to India. And this alarming trend has already started. A time may come when you (IT professionals) have skill sets but no job is there in the market.

So what are the solutions?

My recommendations are divided into two parts:

a)      For the employees –

    1. A Fresher, who is new to the industry, must not worry about salary (as long as they are at par with the market). I keep hearing fresh graduates saying, they are not interested to join an SME because “they pay lesser”.
    2. Do not keep asking for a salary hike.
    3. Speak with your employer and do some extra work and earn money. I am not telling you to do freelancing (hidden manner) by stealing company clients. What I am suggesting you to do is, “go and teach few students, who need you as mentors”. I know some developers who are teaching students after work or during the week ends. They are earning well and have stopped asking for salary hike.
    4. A visible problem with the IT professionals – they keep changing jobs and hopping from one company to another. I have asked few of them the reason for this and they have told me “we change jobs because of career growth and for security”.  I ask them “how do you define career growth? Do you think salary hike is equivalent to career growth?” Most of the times I do not get any specific answers from them. And as far as security is concerned I tell them “No one is secured. A company is not God” and I even tell them “Your Company will not take away your job; you will lose it because of market forces”.

To the employees: Remember one thing, the more you change your jobs just for a rise in salary, the more you are increasing your “price”. A day might come when your job will be given to someone else in some other country even after you have the skill set.

  1. An important piece of advice for the students – higher education is not for everyone. I have seen many engineering graduates, who are unable to find work through campus recruitment, start applying for B-Schools. They simply do a blunder. I am not saying this because I have anything against management studies. Think of this situation, which is sadly a reality. An engineer spends almost 2-3 lakhs for his engineering course, then goes for management studies and there he spends another 4-5 lakhs. (Just imagine the state of the parents). So after passing out from a B-school 90% of the candidates are “qualified” but cannot be afforded by 80% of companies just because the candidate’s salary expectation is way higher now.

So my appeal to the students community – after passing out if you do not have a particular skill set then instead of doing some higher studies go for the following

  1. go to an institute and learn a particular skill set (PHP/SEO Content Writing/Ruby of Rails etc)
  2. go work in an SME or a start-up and learn the skills
  3. Find mentors from the IT Community who can help, teach and guide you.

b)      For the employers  –

  1. My appeal to the SMEs and start-ups is that do not expect that best students will join your company. Rather take normal students (with basic education) and train them up (increase your training & development costs). The more qualified candidates you take, your resource cost will go up. And from the very beginning “do not expect them to stay with you for lifelong.”
  2. The start-ups need to be more professional and organized so that students can join your company to learn. I have asked many students why they do not prefer to join a start-up (companies with less than 3 years into operation) and they reply “start-ups are not professionals”.
  3. Go to various districts and recruit students from those areas. ( Follow ZOHO’s model)
  4. My appeal to the companies who are into training business – keep the price of courses as low as possible ( without compromising on the quality) so that a student after completing his graduation can afford to pursue the course. (80% do not go for any course after graduation due to affordability issue).
  5. Another important point: Do not move to some other location just because the other location is more posh, they organize tech events etc. Think like a business man. Move to a place where your resource cost does not go up. Remember work comes to you as long you have a team (human resource) who can be afforded. Think smart, think inclusive.

There is a huge opportunity in the IT business. The total IT, global and domestic, addressable market by 2020 would be USD   1.5 – 1.6 trillion. The question (concern) is “can you (companies) tap this market”? Or “will your (IT professionals) jobs move to some other locations”?