The IT industry is bracing for some protectionist action in the US after the collapse of the WTO talks in Geneva last week.
BANGALORE: The IT industry is bracing for some protectionist action in the US after the collapse of the WTO talks in Geneva last week.
The industry fears that it could be hit hard if the new US government decided to go in for sweeping reforms on outsourcing.
“While our business in the US has not been affected by the slowdown so much, the failure of WTO talks and the election of a new president may impact us. Protectionism can rear its head in some form,” said Sudip Nandy, president—technology, media & telecom, Wipro Technologies.
Krishnakumar Natarajan, president & CEO, MindTree Consulting Ltd, said had the talks been successful, it would have helped IT companies “improve their operational efficiency”.
Currently, IT companies rely on H1B visas for deploying Indian workers for onsite jobs.
Since the US government has fixed a quota on the number H1B visas that can be issued in a year, the companies usually fall short on acquiring sufficient visas to execute orders in the US.
Despite the subprime crisis and the economic slowdown, US continues to be one of the largest software importers from India. “It’s (the failure of WTO talks) a bit of a dampener but does not spell doomsday,” Natarajan said. He dispels concerns over the new US government’s stand on outsourcing.
“There will be rhetoric during elections but it (outsourcing) has become a part of life in the US,” said Natarajan.
Nasscom chairman Ganesh Natarajan does not see any major fallout on the industry. “It will not (impact the industry). I am just coming from DC (Washington) and the feeling there is that this will be resolved in the new administration,” he said. But MindTree’s Natarajan said IT companies would have to live with the visa issue.
“Professional visas would have allowed free movement of people. Today, if you have to send someone from India to the US to understand a client’s need or any other work, you have to wait for months,” he said.
The US government releases the H1B quota in October every year. Natrajan said these visas, issued in April, are exhausted within 12 hours.
“Last year, out of every three (H1B) visas applied for by a company, only one was issued. This year also the ratio was the same. The professional visa would have taken care of this irritant,” said Natarajan. This visa restriction has forced IT firms to hire more American workers for onsite jobs. This pushes up their labour cost.
Usually, companies depute close to 25-30% of their total employees for onsite jobs. Earlier, most of the onsite jobs were carried out largely by workers from India. That is changing. Today, the proportion of US employees (including of Indian origin) in the onsite team has shot up.
N Ganapathy Subramaniam, president—financial solutions, Tata Consultancy Services (TCS), said the trend is to hire more and more locals (US citizens).
“That is because the locals bring with them knowledge on local market, domain and technology. Customers are looking for value of both low-cost and high-cost locations.” Subramaniam felt the globally distributed work paradigm is a reality that the companies would have to come to terms with.
Wipro has also begun localising its US operations by recruiting more Americans. Nandy said that was one of many ways for Wipro to protect itself from being hit by the restrictive visa rules.
“Toyota has localised to such an extent that it is not affected by the protectionist policy of the US,” said Nandy.
p_sharma@dnaindia.net
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