We all knew (at least I knew) this was coming!. I run a Software company and when I was looking to hire developers, I was forced to pay very high market rates. Kids out of the school got top offers from big outsourcing companies. Some of these students did internship with us and I did not see them any different then those who did not get placement. In some instances, the not so creamy layer students did much better in their projects in our company.  I ended up offering jobs to many of the students who did not have placement through college and did their internship with us. I even made their package above average compared to what the market pays in general in this region. But it was nowhere close to what the Top companies offered to those creamy layer.

Being a startup, the expectations we had from the new hires was very high. There is always a ton of work as we are building very complex products for Indian Markets and lot of work goes in research. This is in contrast to those working in large companies who are on bench for first 6 months and then put through in training for few more months. This is an example of a kid out of school with no work pressure but paid handsome $$ for him to afford expensive car, have luxurious bungalow,etc in boom time. And of course this did not seem right at all. A one to two year experienced engineer,recent passout with very little loyalty to company making lot more money compared to a 20+ year experienced engineer!!!!!!

On the global scale, the Infotech Industry had been creating lot of value addition and impacting the lives of every individual worldwide. Technology was supposed to simplify things and make life easily. But what we saw as people started getting more and more busy every passing day -is they are either glued to their computers or cell phones and hardly had time for family. With Instant Messengers, Cell Phones, going through unnecessary emails popping up every minute(jokes, friends forwarding stuff etc), net browsing, coffee breaks, meetings near pantry/cafeteria, etc there was hardly any productive work getting done in offices. It seemed that suddenly the economy graph was shooting sharply compared to population growth and for everyone to keep up with economy, we all had to work crazy hours(and still do). This was not really the case at all some years ago . This was again a case of unproductive usage of time, high salaries and fake demand created for additional hours because the attention span and office productivity continue to decrease.

Sadly enough, more and more investment was put in Hi-Tech / Software Services business which - even today is hard to measure. How do you measure a Software Asset? How is facebook valued different then orkut or hi5?

If hi5, twitter, digg or  plaxo comes with new killer feature how does their valuation increase and others decrease? Lets say facebook is valued at $50 billion (just as an example) and is a US business and tomorrow lets say a new startup in India lets say 'jaldibol ' - an Indian citizen journalism startup brings so much innovation that it gets more traffic than facebook(just a hypothetical example). This may make 'jaldibol' valuation more than facebook e.g $60 billion.  This may or may not result in lower valuation for facebook. But what this did is suddenly - Indian entity got valued at $60 billion which even 100 year old big businesses don't get valued despite being the best company with huge infrastructures for years and the value of "knowledge" - intangible asset creates huge value from nowhere!

Lets take this hypothetical example even further. Now the investors / VCs go ga-ga over 'jaldibol' and they put in  millions in this product and well established companies try to get a piece of this product 'jaldibol'  by putting in lot of money. What happens if tomorrow there is a better product than jaldibol? What if jaldibol servers crash and there is downtime, etc? What if a new feature in Jaldibol makes usability *suck* or jaldibol fails to innovate and it brings down its value drastically?

There is a real issue even today on how to measure such Soft Assets. How can this knowledge centric economic value be brought up in GDP/GNP economic numbers of a country? We are still measuring economy with old yardstick and have totally overlooked how to measure the knowledge assets that continue to dominate the economy over the last 30 years.

Till we find a solution and better systems to measure knowledge assets and till we rationalize salaries and there is overall reduction of at least 40% salaries on average across the globe, we will continue to see this recession deepen. No matter how many stimulus packages are announced and no matter how much nationalization of failed businesses is done, unless the problem is looked from the right perspective, we will not see a real revival and the balloon is going to get bigger and bigger.

Ideally since companies can't cut salaries, they will cut workforce till majority of workforce is laid off.  As people struggle to find jobs at their last salary levels and with no jobs around, they will become freelancers and take home very little money. It will take years for everyone to realize that they had been getting overpaid and its time that they consider 40% lesser pay for interest of global economy.  Even after this, there is lot to be done by governments to measure knowledge assets.  We are in rough times.