Finance in IT industry

This post is for all the finance graduates who are wondering about opportunities that are present for them in Indian IT industry. There is very less awareness about the roles for finance graduate in IT. It is common perception that only role available is that of business analyst who acts as domain expert for financial sector and plays key link between business and software engineers. This business analyst is expected to work from requirement gathering to testing. But this is just operational role from IT organization perspective. Of course then there are also roles which are present in any company irrespective of the industry like one of financial planning and budgeting etc. But other than these there are other exciting and upcoming areas which I guess should interest most of the finance guys and which are present in most of the companies which have attained certain IT maturity.I intend to just highlight this broad area in my post.

Assuming a finance graduate joins an investment bank/fund house; his success would depend on his ability to manage his portfolio of assets such that he provides higher returns to his clients. This requires skill-set that enables him to perform valuation of different available assets and which I believe is the one of the most difficult part of his job. So is there any opportunity for the such person in IT industry ? Is there anything which could be as challenging as this? And my answer is yes. In fact gravity of problem increases than in financial sector. There the aim is to do valuation of asset and manage portfolio of assets which are mostly tangible and quantifiable but in case of IT one must do valuation of services and manage portfolio of applications. This is certainly more difficult since its intangible. If asked to draw parallel with equity then imagine yourself trying to value equity offered by newly formed company in some very new industry with no existing comparables. Imagine if someone was asked to value google as company in say 1980’s. Yes now I guess one would understand the gravity of problem trying to value intangible service. So why is it required in IT to do valuation of services? Its answer is very simple: - for its existence. It is very common problem which many CFO and CEO face today. They unable to understand where does the money for IT go? And moreover what tangible benefits does IT provide to the company. If you put in more MBA terms how does IT help in increasing shareholders value? You may like stakeholder instead of shareholder then I am fine with it too!! The problem is more aggravated when IT is horizontal servicing different business units. No business units are able to determine financial gains from IT services and economic downturn like this certainly makes them prune their IT budgets. So it is required to determine value of the IT services. Now the next question is how. This is most difficult since there has not been any Damodaran born in the industry to help them. Though there are certain guidance provided by different governing body but literature and research is much sparse compared to one available with financial sector. So I think this is one of most challenging areas for finance guys with bit of IT knowledge and strong business fundamentals to look forward for in IT industry.

I hope I pointed to some new areas for most of you guys who are not well versed with this industry and an opportunity for 2010 graduates. I know it doesn’t look as sexy as working in investment bank but for someone like me who passed out in 2009 and was forced to join IT industry it looks really exciting. From the day I joined industry my aim was to leverage my finance knowledge and provide new perspective in IT and am atleast satisfied that in my 6-7 months I have been able to research and work on this area. This is how I have made my knowledge relevant to my company and “am trying to create value for shareholder/stakeholders and who knows I may be damodaran in making for this industry." :)

This post is also answer to lot of questions which my friends are trying to figure out like what am I doing in an IT company. In fact one of them was shocked to know that even after MBA Finance I have rejoined IT industry. He glanced at me with a look as if I was black sheep in finance community and must be stripped of my degree. For him it was demeaning of the esoteric financial knowledge by working in an IT company . I hope that this awareness will help me to salvage some pride in eyes of such guys.