By Preetam Kaushik
The US presidential elections are over and so is the speculation about repercussions in the Indian outsourcing industry. Before the elections, my opinion was that being against outsourcing is more of a rhetoric that President Barack Obama indulges in than a real, deep-seated view.
So Obama can follow through some of his promises which happened in the past as well, the question is if Indian IT companies are already well equipped to handle the force Obama.
The Argument for Outsourcing in the US
Before delving into how Indian outsourcing providers are responding to the re-election of President Obama, let?s take a look at the argument in favor of outsourcing as a boon to the US business community. Low cost and high profitability is what companies are looking for, likely factors for increasing shareholder value. And the bonuses of the CEOs largely depend on increasing that shareholder value. America has been the pushing force behind globalization, and may be one of its biggest beneficiaries and IT outsourcing companies understand that very well.
However, offshore outsourcing has become so huge that to tamper with what has been established is interrupting the supply chain in a way that can negatively impact the profitability of the ?1%? Obama would like to see support more of the tax burden.
Indian Outsourcers Remain Calm
Strangely enough, even though it is one of the biggest players in outsourcing, the Indian outsourcing industry hasn?t shown any adverse reaction to Obama?s re-election. However, Indian outsourcing providers are conscious that localized subcontracting 2 may be essential to meet the norms that American government may impose in coming years. The Indian stock market initially reacted positively to the re-election of Obama by going up 0.66 %.
Most of the industry leaders view re-election more as contributing toward stability rather than against outsourcing. Siddhartha Pai of advisory firm ISG suggests that there may be some changes in US tax laws that could potentially benefit local job creation or for taking away tax benefits for companies which outsource. However, it is then the bottom line that would determine what companies chose to do. Many industry leaders may feel that the companies who were on the verge of getting impacted with some change of policies by Obama?s last term have already put in place some policies, which triggered some strategic changes in IT outsourcing business.
Some of the companies, however, have started diversifying. This includes relatively smaller consulting operations and also offering enterprise solutions. Azure, an outsourcing company based in Gujarat, India, ran quality control projects out of the US that helped it to tide over allegations of job loss and other adverse impacts on the US economy. And Sai InfoSystem, another Indian IT outsourcing company, said in fear of backlash by Obama it started running mobile commerce operations out of the US.
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NASSCOM data suggests that Indian IT firms have increased their investments substantially in the US. Nearly 175,000 jobs are created in a market which had such high unemployment rates. Conclusively, most of the Indian outsourcing industry believes that the supply chain globalization has been able to create, which spans across countries for the sake of increasing efficiency and productivity, is the most important force at this point of time.
Obama is the president of one of the largest economies of the world, but probably cannot reverse this significant force of globalization. It may be delicate to comment on what Obama might do in days to come as he faces the challenge of creating more jobs in America, however, it is even more fragile to think Obama would disrupt the flow of productivity that benefits American shareholders in the end. The clear stance of Obama against outsourcing has prepared IT outsourcing companies to realize that just in case Obama intends to deliver on what he promised against outsourcing, they must be-well prepared to deal with the threat.
All large Indian outsourcing companies had already started local outsourcing for certain parts of their work; now even many of the smaller, lesser-known providers are also equipped to handle the additional visa related constraints. This is when most companies know that what matters most to America is getting its economy on track and outsourcing will play a big role in making the American companies efficient. The role of Obama in curtailing outsourcing to some extent may only be symbolic and not factually significant.
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