New Delhi, Jan. 25: Indian IT firms do not expect to be affected by US President Barack Obama’s campaign against outsourcing.
Industry players and analysts say IT-related work will continue to be outsourced to low-cost countries such as India because US firms will seek to cut costs and remain competitive.
“The demand environment continues to be quite good and the deal flow has been positive from various geographies, including the US, which we expect to continue,” said an executive of a top infotech firm.
Indian IT firms get 55-60 per cent of their revenues from American firms.
In his annual address to Congress yesterday, Obama urged American businesses to bring jobs back to the US, adding he wants to eliminate tax breaks for companies that outsource.
“No, we will not go back to an economy weakened by outsourcing, bad debt, and phony financial profits,” the US President said.
Sudipto Bose, an independent IT market analyst, said, “It’s natural for the Americans to be worried about the offshoring of jobs, but at the same time US corporations will also be concerned about reducing expenses, which is why infotech outsourcing will perhaps not be hit. In fact, we expect an increase in IT work for India as nations shrug off recession and try and get their act together.”
Call centres in Philippines, a major market for American outsourcing, have already taken in their stride Obama’s statement. The Filipinos consider Obama’s statement as rhetoric and feel they will remain unaffected.
“The Indian IT industry consists of companies that are world class, running operations and making investments all over the world, including the US, and contributing substantially to build innovation and competitiveness in the American economy,” said the National Association of Software and Services Companies (Nasscom).
“Nasscom understands that the US is in the midst of a highly competitive election cycle and Nasscom is heavily engaged in the political debates in the US,” the industry association said.
The $88-billion (by revenue) Indian IT outsourcing industry, according to Nasscom, is projected to touch $225 billion by 2020. For the fiscal ending March 31, Nasscom expects IT revenue to grow around 15 per cent from a year ago.
The country’s top outsourcing firms, though cautious on revenue growth because of the overall global slowdown, expect the outlook to remain robust.
The largest software exporter by sales — Tata Consultancy Services — had said its deal pipeline remained healthy and expected pricing to be stable this fiscal.
However, Infosys, the second-largest software maker, lowered its guidance for full-year revenue even as it beat the Street estimates by posting a higher-than-expected rise in net profit.
Infosys blamed the cut in its dollar guidance on the worsening European crisis. “The global economy, driven by slower growth in developed markets coupled with the European crisis, could impact the growth of the IT industry,” Infosys CEO and managing director S.D. Shibulal had said.
US probes Infy
Infosys today said the company and some of its employees were the target of a US probe related to its sponsorships of B1 business visas.
“During a recent meeting with the US Attorney’s Office for the Eastern District of Texas, the company was advised that the company and certain of its employees were targets of the investigation,” Infosys said in a filing to the US regulator Securities and Exchange Commission.