At a fundamental level the law firms need to understand the cyclical nature of economies and the fact that nobody is capable of timing the boom and bust phase with great accuracy. The intelligent thing then is to make the most of being in the current economy and investing appropriately so that the firm is ready for change and has a competitive edge over its competitors when the economy turns. Usually one tends to falter in executing this plan when one is right in the middle of the recession, which some claim to be the the most dangerous since the great depression of ’30s. In the recent past there have been various recessions of all kinds in ‘89, ‘96, 01 and now 08-09 which were caused by russian currency crisis, difficulties in south asian economies and the IT bubble. This time the cause seems to be credit crisis in th US financial syatem, which has had systemic risks for decades now. Since the financial services industry in interwined with all other sectors of the economy, this crisis has effected other sectors also. Meanwhile the auto industry has its own troubles for long which have come to fore now.

In essence the current depression is like a series of coincincidences which just happen one after the other. Gladwell talks about these in his latest book, Outliers.

Here we will discuss the case of some IT companies which have proactively taken aggressive decisions in this economy and those which have merely reacted ot it and done what is normal.

In India the financial year closes in March and in an effort to appear strong , many of these IT companies have slashed workforce precisely in this quarter. This is merely a short term knee jerk reaction, which might satisfy the shareholders and analysts at the annual gathering but presents the grim picture of companies which merely react to the changing economies and whose decisions are a function of the times they are in . These companies will do well in a boom phase and bad in a bust phase of a business life cycle.

The intelligent companies will do better than these companies in all phases of economy because they are always preparing for the future.  They have actually strengthened their sales teams in this difficult time when other companies are doing exactly the opposite.

The market leaders always prepare for the future and take decisions proactively and are prepared for the changing times , before they actually change. Unfortunatelythere are only a couple of IT firms in India doing this now.

We will discuss the case of US amlaw firms in these times  in a subsequent post.

Sources :

http://www.businessweek.com/

http://www.executiveboard.com/