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Outsourcing: Obama Vs. India

Outsourcing: Obama Vs. India

February 15, 2010

As the US president ups the ante against US firms shipping jobs overseas, how significant is this?

This week wasn’t the first time that Barack Obama spoke out against outsourcing. He has been categorical in his stance about the issue right from the time he started campaigning for his presidency, where he promised to stop American companies shipping jobs overseas from getting tax breaks. This created a bit of a panic among IT players in India who viewed it as a veiled threat to outsourcing, one of India’s largest export-driven industries today. His most vicious attack was in May 2009, right in the midst of the recession, when he said something to the effect of ‘Say no to Bangalore and yes to Buffalo’.

Many brushed aside his comments saying they were more political than anything else, and had no linkage whatsoever to IT or BPO outsourcing.  Since then there is a broader consensus among Indian IT giants that Obama’s proposals are aimed more at correcting US taxation anomalies, rather than targeting India. In fact most IT companies say that even if Obama does clamp down on US companies by cancelling their tax breaks, the cost advantage of outsourcing work to India would be still far greater than shifting jobs to the US, and hence there was no threat at all!

So despite such confidence, why does every comment of Obama’s on this issue still create a flutter? Why do the Indian media go berserk, frantically asking for ‘all is well’ reassurances from CEOs when the US president says something remotely linked to protecting American jobs?

Well the fact is, this is more of an emotional response than anything else. This phenomenon called outsourcing has been something of a life changer for us Indians. It created a new breed, a new generation of upwardly mobile whiz kids who’d never seen money before becoming overnight millionaires. These were middle class guys who made their fortunes without godfathers, without the backing of a family legacy and without sucking up to politicians. It empowered hundreds and thousands of college-going Indians, gave them respectable jobs in call centers. It created new age cities like Bangalore, Hyderabad and Pune and brought India on to the world map. It revolutionized the concept of doing business and making money in India, and continues to do so as its effects are slowly felt in massive job creation and prosperity across small town India. Most importantly, it reinvigorated the entrepreneurial spirit in us that had been so brutally curbed during the license Raj. Of course, none of us would want this dream to go sour, and hence all the hoo-ha!

Any suggestion that this party might come to an end will of course elicit strong reactions. After all, the story of Indian outsourcing is the story of India’s coming of age. In the last 10 years the industry grew from being a $4.8 billion industry to crossing the $50 billion mark. And even in what has been one of the worst economic crises since the Great Depression, Indian IT companies have emerged relatively unscathed, despite relying heavily on clients from the US to do business. Of course there have been contract renegotiations and a cut in IT budgets, but the fact that all of them are still talking of heady growth going forward is proof enough of the sector’s resilience.

Of course, with exports making up to 70% of the sector’s revenues, there are serious concerns over any protectionist moves by the US. But the fact is NASSCOM; the industry body for Indian IT companies says the domestic IT & BPO market is expected to grow by a whopping 12% this year as compared to an export growth of just 5.5%. That clearly says something. There is huge scope for domestic growth and instead of fretting over what happens to contracts from the US, it is perhaps time to tap that potential and look inwards to drive sales. The Indian government’s IT spending itself is expected to double this year and experts predict there is going to be a massive demand from the private sector, especially emerging businesses such as healthcare and retail, who will need to streamline their backend operations.

Not such a big cause for concern then, is it?! After all, who better to rely on for growth than a population of a billion plus who come up with savvy new demands day after day?


  • Barnaby Haszard Morris
    Barnaby Haszard Morris
    23.02.10 02:25 PM
    I strongly dislike the idea that cost-cutting measures outweigh human concerns in today's Western companies, leading to widespread loss of work as it is displaced, but I work in medical transcription in India and am part of 'the problem' so I can't really say anything... bizarre, though, that costs drop by 90% and turnaround times almost as much if you employ 70 Indians to do the job of 2 or 3 Westerners. Something just isn't right there.
  • Anu
    19.02.10 01:21 AM
    You are right! The Outsourcing segment in India growing would definitely keep the job vacancies momentum upward but the people who are already established in that field, people who have seen their bank balance grow without any "backing" as you said, will see the comment as grabbing the candy from their hands.
  • Rahul
    17.02.10 01:40 AM
    Brilliant! :-)

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