Seems the current recession is turning US ‘inwards’. In the country, which taught the world lessons of `open economy’, the demand for protectionism is getting louder. The pains of turbulent economy is making many Americans target outsourcing. Giving his first speech to a joint session of the US Congress, the county’s president Barack Obama said, “We will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.” If Obama follows through with the announcement in the budget, the move may hurt India’s BPO sector as without the tax breaks, US companies may find it less attractive to outsource jobs to India. Obama’s conservative stance on outsourcing poses a threat to the growing Indian IT industry already reeling under the effects of a troubled global economy. Here’s over to how Indian IT is reacting to Obama’s outsourcing plan. Infosys
Reacting cautiously to US President Barack Obama’s remarks on outsourcing, Kris Gopalakrishnan, CEO of Infosys Technologies, said outsourcing had enhanced the competitiveness of US corporations and had created more jobs within the US economy. “The US is a very open economy and a strong proponent of free trade globally. We are confident the US will not take any measure, which might hurt its global competitiveness,” Infosys said. “We need to wait for more details to understand Obama’s statement,” Infosys added. TV Mohandas Pai, board member and director, human resources at Infosys Technologies, said IT outsourcing was the least of Obama’s worries. “Over 60,000 US jobs are being lost every month and reviving the manufacturing sector there is the target,” he said. Wipro Wipro said in the current economic environment, it was imperative for global corporations to collaborate on technology and innovation. Wipro executive director and chief financial officer Suresh Senapaty said that policies of protectionism would only hinder the revival of the world economy. He added, “We feel that in the current economic environment it is imperative for global corporations to collaborate on technology and innovation.” Satyam According to Kiran Karnik, former Nasscom president and current chairman of Satyam Computer Services, which is reeling under Rs 7,136-crore financial fraud, the move would have little impact on it. “Our exposure is not much when compared to that of our peers. We don’t want to comment much beyond this,” T Hari, Head of Marketing and Communications at Satyam, said. Karnik said that offshoring will continue because of operational efficiencies and not just the cost advantages. MindTree
Echoing similar sentiments, MindTree, CMD, Ashok Soota said, “His speech was an extension of what he had spoken earlier in his campaigns. The basic economics and logistics of outsourcing have not changed, and therefore it will not impact India adversely.” Nasscom
IT industry body National Association of Software and Services Companies (Nasscom) said it was heartening to note that Obama had supported the need to “avoid protectionism” in his speech. “This is not the time for protectionism but for global collaboration, if the world is to come out of this economic downturn quickly. We hope that all other countries would support this and continue to be proponents of free trade,” Nasscom said. “Global outsourcing has helped (US) companies gain the vital competitive edge – time to market, transformation of businesses, integration of processes, reduce costs and enhance efficiency — all of which are key drivers for revival of economic activity,” it added. FICCI
The Federation of Indian Chamber of Commerce and Industry, in a statement issued from New Delhi, expressed concern over Obama’s statement, saying “protectionist measures could deteriorate the situation further”. “Coming at a time when the global economy is going through a phase of slowdown and when countries need to work collectively, protectionist measures of any kind could further deteriorate the situation,” Amit Mitra, Secretary General, FICCI said in a statement. On the likely impact the US move could have on Indian companies, FICCI said, “We will have to wait and see how the rules are framed and implemented.” Mitra said that this is a matter of grave concern not only for India but also for the US. He said, “Perhaps what is wrong in this is, he may not have had the opportunity to read the literature of his own US Chamber of Commerce. When he does and if he does, he will know that he is really punishing American companies, not Indian companies only. Our sense is that this is something that has been in the offing. My feeling is that they are cutting their own nose to spite the phase.” Tholons Inc “Some companies would try to strike a balance between offshoring and doing the work domestically as a result of this,” said Vinu S Kartha, Partner, Tholons Inc, an offshore advisory firm. Earlier, company’s CEO Avinash Vashistha, said, “It is not very tangible because he (Obama) cannot dictate what companies do or do not do.” Vashistha said it would be easier for Obama to control jobs that are going offshore in the manufacturing sectors such as textiles and autos. “But as far as the (IT and BPO) services jobs are concerned, we expect no changes,” he said. Perot Systems
“Businesses today are truly global than ever before and such protectionalist measures not only restrict innovation but also hamper the progress of globalisation. Global markets are a two-way street to sell and buy products and services,” said Sujata Rakhra, VP (marketing & communication) APAC, Perot Systems. Mindplex Consulting
“It is too early to judge the impact. It is more to do with the buyer sentiment rather than the real impact on volumes,” said S Sabyasachi, founder of Mindplex Consulting. You might also like
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