'Obama's anti-outsourcing may hurt global trade'

NEW DELHI: His anti-outsourcing views may have struck a chord with middle-class Americans during his successful presidential campaign, but Barack Obama is having a tough time selling these policies to some of the largest US corporations.

Top US corporations such as IBM, HP and Sun Microsystems, which have large outsourcing operations in India, are giving the cold shoulder to the anti-outsourcing policies of the Obama administration.

The US government's decision in February to offer an annual tax shield of $5,000 per employee per year to companies that keep jobs in the US had invited criticism from several quarters, most notably from the $60 billion Indian software and outsourcing industry which depends on the US market for 65% of its revenues.

But senior executives at several US corporations, now touring India, also say the anti-outsourcing policies and impractical and could adversely impact world trade.

"The local sourcing push by the US administration is unlikely to be effective in a globalised world, said Marius Haas, senior vice-president, HP ProCurve, which competes with Cisco in products such as switches and routers and has research facilties in India.

���We have labs spread across Bangalore, Costa Rica and Europe. It���s a competitive economy and you go where the talent is. The local sourcing policy on hardware is unlikely to work as 80% of the world now sources manufacturing from countries like Taiwan and China,��� he said.


Microsoft, the world's top software company, has already aired its opposition to Obama administration���s curb on H1B visas that provide jobs to non-US professionals in the US.

Indian subsidiaries of US companies such as IBM, Sun, Microsoft, Oracle and HP together employ over 150,000 people. IBM, which has more than 70,000 employees in India, sees no merit in US government���s protectionist policies.

���We manufacture products and deliver services from virtually every country in the world. We are present in more than 170 countries. IBM goes wherever the talent and the market is,��� said Edward Orange, IBM���s director ��� Lotus Business Unit, software group, Asia-Pacific.

Analysts also do not see such policies making a big impact. ���Companies won���t give up offshoring strategy because of this," said Suvojoy Sengupta, partner at consultancy firm Booz & Company.

Sun Microsystems says the US administration���s moves could affect the competitiveness of the industry.

���The policy may shrink global trade in the long run. Not every job can be outsourced. But a job has to be done at the right place and at the right time. Outsourcing is like a bag of trail mix of nuts and dry fruits, which are sourced from all over the world. Curtailing outsourcing will mean affecting that bag of best trail mix,��� said Joe Hartley, vice-president for Sun's global education, government and healthcare business.

Bangalore-based offshoring advisory company Tholons also played down the impact of the US administration���s anti-outsourcing policies, saying it would be difficult to prove that jobs have been outsourced.

���If the US subsidiary of an Indian company or a US company is taking over the outsourced job, like say McDonalds outsourcing to TCS in the US or IBM, and in turn taking IT support from India, it will be very difficult to prove that the job has been offshored. But in the case of BPO work, the blur may be less apparent,��� said Avinash Vashishtha, CEO of Tholons.

Some Indian BPO companies based in India also seem unfazed by the new US policies. ���It���s in India���s best interest if the US takes some hard measures to revive its economy. It might not impact too much as offshoring still remains a huge cost and quality arbitrage opportunity, with about 40% savings,��� said Rohit Kapoor, CEO of EXL Service, a Nasdaq-listed BPO firm based in Noida.

America���s largest healthcare insurance provider UnitedHealth Group (UHG), which outsources to IBM, Wipro and Cognizant, said it will continue to look at India to ramp up its business. ���A policy relook is needed. We look at offshoring as a quality and value arbitrage as many work skills just don���t exist in the US anymore. We will continue to ramp up our presence in India,��� said David Wichman, global vice-president of UHG who was in India early this week. The insurer���s captive BPO unit employs more than 2,000 people in India.

US financial services companies such as Goldman Sachs and Morgan Stanley, which are changing their business models to offer retail banking services, are likely to ramp up their operations in India, despite the US government initiatives. ���The I-banking business has shrunk. Keeping all jobs in house may not be a great strategy now,������ said Mr Sengupta of Booz & Co.

For US firms looking to cut costs aggressively in a shrinking economy, the lure of up to 40% savings seems to be too tempting to ignore.