‘Whipping boys’ decry Ohio ban on outsourcing

American politicians are at it again; hitting offshoring to cover up their failure to curb rising unemployment rates in the US.

This time, it is Ohio governor Ted Strickland.

On Tuesday he issued an executive order that prohibits spending of public funds for services provided offshore.

And though Strickland’s diktat is not directly targeted at the Indian information technology (IT) sector, it is being seen as a big blow by domestic tech companies which are looking at tapping opportunities in the government and public services vertical in the US.

Many believe the Indian IT industry has become the favourite “whipping boy” for the US policymakers, who have been struggling to keep job losses in check since the global financial crisis set in late 2008.

“I am dismayed by the action of Ohio state. I think this is electoral posturing and the Indian IT industry is becoming a whipping boy,” Subroto Bagchi, vice-chairman and Gardener at MindTree Ltd, said. He believes the US economy had fundamental cracks, but instead of addressing them the politicians were indulging in a “blame game”. “It reminds me of India in the 1970s when we used to blame the so-called “foreign hand” for all ills. We have outgrown that. It is time, they did,” said Bagchi.

On a different note, he said the Indian IT industry was not dependent on US government outsourcing.      Turn to p12

“We largely work with the private sector, but this posturing could create a fear factor in them and lead to a lose-lose game.”

Kris Gopalakrishnan, CEO and managing director of Infosys Technologies, said: “We are concerned with the recent news from US about banning offshore outsourcing by Ohio state government departments.” He, however, feels the move will not impact the second-largest software services company in a big way. “Infosys’ initiative in the public services sector is focused on creating a domestic delivery centre in the US, hence this should not be affected,” he said.

The IT industry lobby Nasscom views the Ohio ban on offshoring government IT contracts as election rhetoric. It expects “more such electoral rhetoric” to come in the next few months. A statement issued by the industry association said Ohio’s ban could be viewed as counter-productive to the US government’s thrust on reducing public deficit and lead to an increased tax burden on its citizens.

In its view, international trade was a federal issue and would be tackled at that level. “Nasscom is leading a delegation to the US later this month and will be taking this up with relevant officials there. The team will also seek support from Anand Sharma, minister for industry and commerce, who is also visiting the US at the same time, to address this issue with his counterparts,” said the industry body statement.

Ganesh Natarajan, former Nasscom chairman and CEO of Zensar Technologies, said the financial impact of the ban would be very small as the share of government IT contracts was less than 1% of India’s IT-BPO revenues of $60 billion. But he believes there was cause for concern from the Ohio governor’s order in a directional sense. “This should not become a trend. We would be worried if other states follow suit,” said Natarajan.

This is the second blow for the Indian IT sector after senator Charles Schumer’s Border Security Bill doubled fees for H1B and L1 visas due to which it will take a $200 million hit this year.