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Currency Exchange Rates & Outsourcing Economics

What Happens To Your Company if

One US Dollar Equals One Indian Rupee ?

Benefit From Gray Arrow A Kaytek Offsourcing Consulting Insight

What Happens To Your Company if One US Dollar Equals One Indian Rupee ?

India's globally best known Software Services Company's Visionary and Chief Mentor smiled at me when I asked him that question many years ago.

He replied " Interesting question, though hypothetical."

I had got my answer.

What has the US $ & Rupee Exchange Rates got to do with Offshoring ?

Maybe Everything.

As of today, 1 US $ trades at slightly less than Rupees 44.

In the old days before the Internet, when there was no Offshoring or Offsourcing, (Yes, there were such days), Market Rates for Services were primarily dependent on the Demand Supply position within the geographical borders of a particular country only.

Or maybe a group of neighbouring countries.

The Internet changed all that.

The ticket to cyberspace is perhaps, only an IP address.

If English is the Killer application today, the TCP-IP protocol is the gun (maybe a cannon for some) which shot the bullet.

To buy/sell IT services globally, I just need a TCP-IP connection.

One fact is crystal clear.

We live in a global TCP-IP wired village, brains and minds mentally inter-connected, across physical distances.

In an old issue of Fortune magazine, I remembered reading about the Impact of the Internet on Business. It said

" Imagine if you stay in a small pond. This was the situation before the Internet.

One day, all the lakes of the world become connected to each other. The waters get mixed.

You can move from any lake in the world to another. This is the impact of the Internet.

Suddenly a big fish in a small pond becomes maybe a small fish in a big pond.

You not only have to compete with fish in your pond but with fish in all lakes around the world."

The Internet has thus changed our 'Life'.

LIFE incidentally is also an acronym for " Lakes Interconnected, Free Exchanges " - the moral of the above story.

The Four Technology laws - Moore's Law, Coase's Law, Gilder's Law and Metcalfe's Law are the channels which connect these lakes all over the globe.

Perhaps, is it time to worry about the 8.3 ?

No, that is not the MS-DOS File format ( in the good old days.)

It refers to the Exchange Rate of the Chinese currency Renminbi against the US $ that has been fixed since 1994.

1 US $ was equal to 8.3 Chinese Renminbi. Revalued to 8.11 Chinese Renminbi in July 2005. It is currently (4th March 2009) equal to 6.84 Yuan Renminbi.

Maybe a question to ask your CEO - " What happens to our company if 1 US $ Equals 1 Chinese Renminbi ? "

Gerald Celante, Founder / Director of the Trends Research Institute in New York, USA believes that the US Dollar could plunge to upto 90% of it's value in the next few years.

This is indeed a scary thought for most emerging economies whose economic fortunes are tied to the fate of the US Dollar.

Gray Arrow Email Us : Can we help in your Offshoring Strategies ?

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Updated on 4th March 2009
Posted on 11th February 2005

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