Indian IT honchos shrug off Obama threat to outsourcing

Indian IT honchos shrug off Obama threat to outsourcing

"Companies that ship jobs overseas will not get tax breaks," Obama said.

  • IANS
  • Last Updated: September 4, 2008, 10:10 AM IST
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Bangalore: The Indian IT industry remains unfazed by the threat to outsourcing sounded by US Democratic presidential nominee Barack Obama.

"Companies that ship jobs overseas will not get tax breaks," he said in his nomination address at the Denver democratic national convention last week.

Having survived the campaign of former US Democratic presidential candidate John Kerry four years ago on jobs being "Bangalored" because of outsourcing, head honchos of leading IT firms here say: "Don't read much into what Obama said in a poll campaign. He didn't say either that firms creating jobs in America will get tax breaks.

"The reference may have more to do with the loss or lack of jobs in sectors like manufacturing than IT services," Som Mittal, chairman of Indian software services' trade body Nasscom, said.

Though the US market remains the best bet for the Indian IT services sector, contributing over 60 per cent of the total revenue for bellwethers such as TCS, Infosys, Wipro and Satyam, Obama's passing reference against outsourcing does not rattle them as it did in the past due to changing market/industry dynamics and advent of globalisation.

"Democratic governments in the past were in support of free trade as the US has been all along. We don't think that practice will go when a new administration takes over early next year. The stakeholders are well aware of the advantages of outsourcing, especially in the service industry," Mittal observed.

Echoing Mittal, Infosys director and human resources department head T V Mohandas Pai said outsourcing was inevitable in a globalised world, as there was no going back considering its benefits for companies, employees and the US economy at large.

"Globalisation and outsourcing go hand-in-hand. If the world is to be a single market for delivery of goods and services, outsourcing has to be part of it to compete and sustain. Increasingly, trans-nationals are driving global growth and outsourcing is inevitable," Pai said.

Admitting job losses was a sensitive issue and a worrying factor during recession, Pai said the remedy in such a bleak scenario was to outsource the work or service where talent and cost arbitrage would enable US firms to tighten belts and save as much to protect or create more jobs.

"On the contrary, by outsourcing IT services or back office operations from countries like India, US companies not only cut costs, but also improve efficiency, productivity and competitiveness by focusing on their core competencies," Pai asserted.

Without countering Obama's "off-the-cuff" remark, Mittal said in the IT services domains, American corporations across verticals were well aware that outsourcing enhanced their competitiveness, increased efficiency and created more jobs to sustain business and drive growth.


"Whether Obama is aware or not, US enterprises know pretty well that outsourcing of services was the way to beat the economic downturn and make-up for the huge shortage of IT professionals. The question of job losses does not arise when there is talent scarcity even for a price," noted Mittal, a former head of HP India for software services.

Even as Indian IT firms remain gung-ho about riding on the outsourcing boom and exude confidence that the trend would continue even if Obama became the next US president, multinationals such as IBM, Accenture, Microsoft and Intel declined to comment on Obama's standpoint, saying they were wary of getting into contentious issues back home.

"As a policy, we don't comment on or join issues that are political in nature. Though issues like outsourcing and job losses are industry-related, we keep away from the business of politics. The fact that we and other global firms are in India to leverage the talent with cost advantage is a testimony to the benefits of outsourcing and off-shoring," an IBM India official said.

Shrugging off Obama's statement as a non-issue that was being hyped, a top official of the global software major said there was no correlation between outsourcing and job losses, especially in IT services, as multiple economic and social factors were behind the slowdown in the US economy.

"Unlike in the past when such noisy issues were raised to unnerve the Indian IT firms and set off uncertainty, no undue attention or weight is being given this time, as our matured and resilient industry has come of age and expanded its global footprint to mitigate any risk in the US," the official said, declining to be named.

The record growth and expansion of Indian IT services industry over the last four-five years has also triggered a reverse brain drain and began attracting some talent from the US despite lower salaries.

"The concept of outsourcing is not new in the US, as it has been a global phenomenon over the decades in some form or the other in so far as talent, capital and markets are concerned.

"In a globalised economy, you raise capital where it is cheapest; locate where talent is abundant/cost-effective and sell in markets that are most attractive and remunerative. In this context, outsourcing becomes a norm rather than an exception," said Sasken chief executive Rajiv Mody.

US-based Harman International's CEO Dinesh C Paliwal was more forthcoming in calling Obama's observation political rhetoric in an election year.

"There is no any federal law that bans outsourcing in the US. Politicians say what they want and businesses do what they ought to. Such assurances during a poll campaign are no different from what any political party does in India or any other democratic country," Paliwal said.

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