News: Double whammy for IT and BPO industry

#Updates

Double whammy for IT and BPO industry

The combo of US presidential elections and a report by the Hackett Group does not cast a positive light on the $100 billion Indian IT-BPO industry. First things first, ahead of the US presidential elections in November this year, it is expected that there will an uptick in the protectionist policies by the presidential candidates. In 2010, Ohio State banned outsourcing of government information technology and back-office projects to India to combat unemployment. All the more, US lawmakers are also reportedly considering proposals such as curbing tax breaks on firms that outsource or cutting visas for skilled workers from India. To counter the criticism that Indian outsourcing firms are responsible for job losses in the US, NASSCOM came out with a report stating that India’s IT outsourcing sector has nearly doubled the number of jobs it has created in the US in the last 5 years. As a matter of fact, the workforce of Indian IT firms in the US was 107,000 in the last fiscal year to March 2011 from 58,000 in 2005-06.

The combo of US presidential elections and a report by the Hackett Group does not cast a positive light on the $100 billion Indian IT-BPO industry. First things first, ahead of the US presidential elections in November this year, it is expected that there will an uptick in the protectionist policies by the presidential candidates. In 2010, Ohio State banned outsourcing of government information technology and back-office projects to India to combat unemployment. All the more, US lawmakers are also reportedly considering proposals such as curbing tax breaks on firms that outsource or cutting visas for skilled workers from India. To counter the criticism that Indian outsourcing firms are responsible for job losses in the US, NASSCOM came out with a report stating that India’s IT outsourcing sector has nearly doubled the number of jobs it has created in the US in the last 5 years. As a matter of fact, the workforce of Indian IT firms in the US was 107,000 in the last fiscal year to March 2011 from 58,000 in 2005-06.

A research report by The Hackett Group states that offshoring of jobs to India will begin to decline starting 2014 and will reach the end of its lifecycle over the next 8 years. The argument, based on examination of 4,700 companies with revenues over $1 billion and headquartered in the US and Europe, is that the traditional model of US and European companies moving finance, IT and other business jobs offshore will come to an end over the next 8-10 years. The report further states that India’s overall share will decline to 38 percent in 2013 from the present level of 40 percent. However, KPMG and AT Kearney disagree with Hackett’s research. While truth of such researches will unfold with time, nevertheless it becomes critical for India to develop alternative sources of demand, to maintain growth of their business services industries.
 

Topics: #Updates, C-Suite

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