India's outsourcing
flip-flop By Siddharth Srivastava
NEW DELHI - The outsourcing story has so far
headed down a one-way street - with Indians and Indian
firms accused of eating into jobs in the United States
and the United Kingdom, and the latest estimates pegging
India's offshore services growth rate at over
40%.
But as Indian information-technology (IT) firms
reach global scales, a reverse trend is also evolving -
Americans and others from the West are finding
employment in the overseas operations of Indian firms.
It is been termed "reverse outsourcing" and nobody,
including presidential aspirant John Kerry, should find
cause to complain about it - even if elections are
looming in the US. This adds to the many out-of-work
executives from the US who have moved to India in
search of better opportunities.
In the latest
instance, an affluent US county has invited Indian and
Israeli firms to open branches, creating millions of
square feet of vacant office space for such use. The
Economic Development Authority of Fairfax County
(Virginia), close to Washington, DC, has opened offices
in Bangalore and Tel Aviv to persuade Indian and Israeli
firms to set up offices in the county.
"We
looked around to see where the hot technology markets
are and how compatible they are with us," said Gerald L
Gordon, president of the authority. "We are targeting as
many as we can get. We tell them: 'You can do business
here.'"
In the past, Indian outsourcing
companies have set up offices in the US, but they have
been largely restricted to marketing, generating new
clients and establishing a countrywide network, all of
which have created very few jobs, which, too, are mostly
for Indians. The move by Virginia comes at a time when
several Indian IT giants such as Infosys, Wipro and Tata
Consultancy Services (TCS) have resorted to hiring
Western employees to deal with local populations abroad,
riding profits generated on huge international business
deals as well as the need to penetrate markets further.
Infosys Technologies, which has risen
to become the country's second-largest software maker
mainly due to outsourced work from the West, pioneered
the reverse trend this year by investing US$20 million
to create nearly 500 consulting jobs in the US. The
company has set up a subsidiary in Fremont, California,
to provide business consulting to US corporations.
The new company, Infosys Consulting, has begun
"aggressive hiring in America", Infosys chief executive
officer Nandan Nilekani said in a statement. "As we are
looking to expand our global footprint, we are creating
local employment in the countries we operate," he said.
While the US has lost thousands of jobs to
low-wage countries such as India, in a practice termed
as offshore outsourcing, the investment by Infosys shows
outsourcing can also generate new jobs in the US -
though on a smaller scale, Nilekani said. The company's
American employees would advise US corporations on
improving their efficiency by embracing outsourcing and
moving work to Infosys' offices in India. Hiring
Americans would help companies to better understand the
needs of their clients, as well as industry trends,
Nilekani added.
In the first year, Infosys
Consulting will hire 75 experienced business
consultants, with plans for a total of 500 hires within
the next three years. Infosys, which employs 23,000
people, offers software development and back-office
financial transactions for companies abroad. In the
fiscal year ending March 31, it is expected to surpass
total revenues of $1 billion for the first time. Infosys
Consulting will also be opening offices in other
countries later on, but Nilekani declined to say where.
Not to be left behind, TCS has announced that
it has opened a training center in Buffalo, New York,
as part of a program to expand its presence and bring
jobs to the area. A global IT-services provider, TCS will
provide advanced training in IT to new recruits and
exiting employees in the North American region. The
training center is aptly named "Chrysalis", a word
signifying the evolution of a larva into a butterfly.
Company executives explain that this reference is
analogous to the emergence of bright new talent into
advanced IT professionals who will lead the technology
industry into the future. The firm said it has already
hired 20 new recruits primarily from western New York
and has plans to triple that number by the middle of the
next year.
The expansion plans of Infosys and
TCS come at a time when a survey by India's lobby group
NASSCOM (National Association of Software Service
Companies) and Evalueserve indicated that the passage of
jobs between India and the UK is not a "one-way street".
It is estimated that fast-growing Indian companies in
the UK have pumped about 300 million pounds (US$54.87
million) into the British economy to date and their
investment levels may increase as India becomes more
prosperous, Sunil Mehta, vice chairman of NASSCOM said.
According to Mehta, 441 Indian firms have set up
operations in the UK, most of them in information
technology. Mehta believes that about 12,000 jobs have
moved from India to the UK, mostly in the services and
IT industries.
Among leading Indian companies in
the UK is Wipro, the main competitor of Infosys, which
provides British companies with business processing
operations in India. Wipro has grown rapidly as UK and
US companies increasingly rely on its services to shift
jobs overseas. The report states that Wipro employs 590
people in the UK and that its European revenue in 2002
reached 121 million pounds.
Infosys, too, has
made rapid progress on outsourcing revenues and moving
jobs to India. Infosys Technologies opened in the UK in
1996. According to the company's latest accounts, its
European revenue reached 75 million pounds in 2002. The
company has 450 employees in the UK. A third Indian
company highlighted in the UK is TCS, which has been in
the UK since 1975. Its clients include Bank of Scotland,
British Telecom, and Transco. Tata has 1,000 employees
in the UK.
In a statement, Infosys spokesperson
Chelsea Hardaway said: "Infosys is not making the moves
to the US and UK to be a pioneer in reverse outsourcing.
The firm's main intention is to provide affordable
consulting services in the United States and the rest of
the world that can draw on India's productivity. There's
just been a backlash against outrageously priced
consulting. Our goal is to give clients a much higher
return on their investment, and to make consulting more
accessible to clients.
"The recent malaise in
the consulting industry has led to a wealth of talent
that is waiting to be plucked by Indian firms like
Infosys. If more Indian companies decide to emulate the
software company's move, US consultants could find
themselves with Bangalore bosses. Right now, we can
cherry pick talent from top consulting firms," Hardaway
said. "That, combined with being able to do work on a
24-hour basis, will be very compelling for our clients."
According to observers, given the outrage
against outsourcing, the use of US offices for offshore
companies could become a successful way to buck
widespread misgivings. Such a trend is visible in the US
banking sector where there is interest in setting up
domestic offices of offshore outsourcing companies that
will allay the fears of customers who do not want their
business being managed from abroad.
Indeed,
there are several other indications that show the
benefits Indian industry growth has percolated to the
West. Recently, Bharti Telecom awarded a 10-year IT
management deal worth $700-750 million to IBM. Pegged as
one of the largest deals in the domestic IT market, the
figure for the first five years is estimated to be in
the range of $250-275 million. In addition, Bharti would
transfer about 200 employees to IBM. It may be recalled
that IBM purchased Indian call center operator Daksh
that will position IBM as a leader in providing
outsourced IT services.
Another much-remarked
about trend is of professionals from the US, UK and
African countries seeking jobs in India - raising
competition in the employment market here.
John
Winchester is one such professional who recently shifted
from the US to India, becoming vice president of
engineering at Indore-based Impetus Technologies. The
company is conducting cutting edge work in outsourced
core software product research and development for US
clients. Prior to this, Winchester was working with
NightFire Software, now merged with NeuStar Inc - a near
monopoly player in the number portability space in the
US. NeuStar works with Impetus for certain core elements
of their telecom infrastructure products.
Winchester said in an interview, "Even as my
company got taken over I was ready for a change. I
approached Impetus who was my client earlier as I was
impressed by all the energy in the company on my visits
to India. And when the India opportunity presented
itself, I saw it as a great career challenge too. The
company is witnessing an extremely rapid growth and my
responsibility would obviously go beyond the normal
VP-engineering type of activities. It would involve
scaling the company's growth too."
He says
several of his techie friends in the US would be equally
interested in coming here. "Maybe not very senior level
ones, but mid-career IT professionals are looking out,"
he adds.
As they say, there is always the other
side to any debate, including outsourcing.
Siddharth Srivastava is a New
Delhi-based journalist.
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