TCS, Infosys, MindTree, HCL and other Indian IT companies to suffer as angry America wants its jobs back

TCS, Infosys, MindTree, HCL and other Indian IT companies to suffer as angry America wants its jobs back

Some American corporations are retaining a small, but highly-prized slice of software jobs at home, mindful of the record unemployment levels and the anger among locals who see work being shipped overseas.

For Indian software providers such as TCS, Infosys and HCL, such a development – it is not expected to become a mainstream trend – could chip away a fraction of new jobs that could have been off shored to them. In an interview with Bloomberg on Monday, Charlene Begley, chief information technology officer of GE, said his company was rethinking the strategy of outsourcing more than half of its IT work.

Already, GE has announced plans to add 15,000 jobs in the US over three years, 1,100 of which will be at the Detroit IT centre. Walmart has also decided to drive the development and design of its e-commerce platform from a new centre in Brisbane, California.

WALMART PUTS OFF BANGALORE CENTRE

Walmart will not open its own captive technology centre in Bangalore, a person familiar with the retailer’s decision said last week. In the latest job posting on its website, Walmart has advertised nearly 150 new technology jobs in Bentonville, Arkansas. “Some of this, let’s say at least a quarter of these, could have easily been managed out of a captive centre Walmart was evaluating to open in India,” the person said.

At least a dozen executives at US-based firms and local American authorities said more companies would shift high end technology jobs as they are under pressure from their local constituencies to create jobs. “Companies like GE are under social pressure to demonstrate they care by creating local jobs. They have been practising economic sense for years and reaped enough profits,” said a senior executive at one of the top US tech firms. He requested anonymity because his company counts GE among its top customers.

In January, GE Chairman & CEO Jeffrey R Immelt was named the head of US President Barack Obama’s panel on jobs and competitiveness, which also includes the leaders of America’s biggest firms, including Xerox and Intel.

“There is pressure to create jobs in the marketplace, as well as demands on technology to create revenue impact in the front office. Both these trends actually play to create jobs in onsite locations – the former as a good corporate citizen, and the latter in recognition of the new levels and roles that IT has to play in these days of mobility, social networks and advanced analytics,” said Vineet Nayar, CEO of HCL Technologies.

He declined comment on GE’s outsourcing strategy but said customers are increasingly asking vendors to play a role. “For instance, if you were to look at what has been happening in HCL, the cosourcing deals we do with customers have already brought 9,000 employees who were with customers into HCL ranks,” Nayar added.

Co-sourcing involves the transfer of a client’s workforce to the payroll of the vendor, a switch which ensures job security to local workers who would then become part of multi-year outsourcing contracts. Experts say creation of more local jobs in the US is not likely to have any material impact on India’s $60-billion outsourcing sector.

“The costs of switching out of outsourcing relationships are too high for most, but I think you can expect to see more companies finding ways to create jobs in the US,” said Esteban Herrera, COO of US-based HfS Research, which advises customers on outsourcing.

“But it is likely GE will be sending less high-end work to India based on this strategy; meaning growth, and especially growth in complex processes and services, will likely decrease or stop altogether.” While GE has been outsourcing to India for over three decades, Walmart started its offshoring pilot with Infosys only last year.

GE currently outsources nearly $1 billion of software development and backoffice projects to Indian companies such as TCS, Wipro, Genpact, Patni Computer and MindTree. TCS is GE’s largest Indian IT vendor, accounting for about $200 million of business a year. Genpact, originally a GE back-office captive, currently gets almost 40%, or around $450 million, of its revenues from the company.

“As a percentage, the jobs moving back are very small. For example, if 500 out of 60,000 jobs move back it is a drop in the ocean. The kinds of jobs that are moving back are select, niche jobs such as design. Politics is a factor, but it is not the only factor why this is happening,” said Phaneesh Murthy, CEO of iGate, which counts GE among its top customers.

With inputs by N Shivapriya