Equity Debt Conflict and the Reverse Pyramid – Two Threats to Information Technology Sustainability

Abstract

In this paper we have studied whether the Indian IT industry is having a sustainable future or not. We have shown using financial statements of a number of companies that the present industry is precariously and irrationally oriented towards an all equity based growth ride. But with no tangible product offered at any point in its lifetime, we have shown using predictive analytics that IT companies are going to lose out the favour of fervent equity investors in the long run. We have shown that this translates to more debt component creeping into a company’s capital structure reducing the DSCR (Debt Service Coverage Ratio) of the company. This will ultimately make the company financially unsustainable. We have also taken into consideration the balanced aspect of maintaining the human resource ratio according to “The Pyramid Approach”. But we have shown for Indian IT companies, this kind of planned “Pyramid” structure eventually degenerates into a “Reverse Pyramid”, thereby making these companies unsustainable.