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New President, Old Problems for India?|
- By CXOtoday News Team, Nov 05, 2008 1622 hrs IST
- Tags : Barack Obama, anti-outsourcing stance, India, Infosys, Wipro, Gartner
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During his presidential campaign, newly elected president - Barack Obama has strongly criticized companies that outsource projects to offshore contractors. He has spoken of stopping tax breaks to such companies and giving them to organizations that create jobs for locals. The scenario is reminiscent of the US presidential elections in 2004, when the issue of outsourcing had created a storm.
Of course it might be nothing more than an attempted appeal to voters, but Indian IT service providers will still be wary of the new administration's views on outsourcing until things get clearer. One way that industry stalwarts think could provide the ideal solution is for the administration to concentrate on creating new jobs, rather than bringing the axe down on outsourcing. Ganesh Natrajan, chairman of Nasscom, assures there is no need to worry about any ban on outsourcing, a sentiment echoed by others. He said certain expertise is country-specific and won't be affected despite a change in government policy.
All the same, he has advised Indian IT/ITeS companies to try and tap new and emerging markets in Japan, China, Asia Pacific, Africa and Latin America. The problem is that even though India organizations are already actively present in other global markets, the US market is the biggest contributor for almost all of them. Samir Chopra, president of Business Process industry Association of India (BPIAI), the apex body for BPOs in India said that the US and India would have to jointly discover new ways to partner together to spur innovation, foster economic growth, develop an educated work force and skilled workforce and create jobs for the global market place.
Girish Paranjpe, president of IT major - Wipro, said the fears of protectionism hitting outsourcing may be overblown. He said there should be no worries as long as the US government is pro-business and that creating jobs in the US may not mean minimising outsourced jobs.
Sunil Mehta, country manager of Quint, an outsourcing consultant also agrees with this view. He said, "Prevailing economic conditions demand US companies get leaner and more profitable, and for that outsourcing is key. I don't expect outsourcing contracts to get affected for the next 2-3 years at least, till the time the US economy is in a better position domestically." However, he did agree that should Obama keep his word, it would badly affect IT outsourcing in India.
This is not the first time that outsourcing has been so hotly contested in America. In 2004, the US Chamber of Commerce had brought out a similar legislation aimed at curtailing offshore IT contracts. There have also been other state legislations drafted from time to time aimed at discouraging outsourcing. In fact, Mohan Sekhar, president & COO of IT services provider -- Collabera feels outsourcing has not been as debated during this election as compared to 2004. He said, "Most American multi-nationals have large presences in developing countries involving significant investments. Scaling back these investments in the short-term could prove detrimental to their competitiveness in the global economy." In fact he says Obama's election to president should be viewed positively.
Partha Iyengar, VP, distinguished analyst, and regional research director (India) of Gartner also agrees with this. He says that we must not misinterpret Obamas statements during his campaign. He said, "In terms of the specific issue of outsourcing, there is widespread agreement that Obama's comments about bringing jobs back to the US were primarily in the context of manufacturing jobs (the bigger challenge and problem for the US) and not about outsourcing specifically." He points out that studies have shown the job loss in the US is actually a very small percentage of the total labour pool and will not have direct impact on the US economy. Also, he says, in a specialized field like IT, the availability of skills locally is important and the US lacks sufficient skills in to address all the needs of Indian enterprises.
"Obama seems to be a realist who will do what is right for US competitiveness, as opposed to pursuing populist policies that may not be in the interest of the nation. Therefore, once the election rhetoric dies down, I do not expect that trying to discourage offshore outsourcing will be a strong issue that will be pursued by the Obama administration," said Iyengar.
CXOtoday tried to contact Infosys, however their comments were not available at the time of publishing.
Related links:
Asia/Pacific Outsourcing Model to Change
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