February 2, 2011 9:12 pm

Indian IT groups shift focus away from US

Indian information technology companies intend to reduce their dependency on a US ­market they regard as “protectionist”, citing a decision to increase visa fees for skilled workers that will raise their ­personnel costs by up to $250m a year.

Tata Consultancy Services and Infosys, the two largest Indian outsourcing companies, told the Financial Times that while the US would remain an important market, they wanted to boost revenues in Europe and emerging markets.

The IT companies’ negative stance towards the US highlights the challenges Barack Obama’s administration faces to create jobs in the tech sector as part of its efforts to reduce high unemployment.

In his State of the Union speech last week, the president cited the IT ­industry as a key driver of job creation.

N. Chandrasekaran, chief executive of TCS, said that plans to scale up the company’s US operations had been slowed by a number of domestic hurdles, while its business in Latin America and Asia had grown at a much faster pace.

“Unemployment remains high so the protectionist measures they introduced last year are still there and this causes concern to us,” he said.

The US passed a law last year that increased the fee for H1B and L-1 visas – commonly used by India’s IT outsourcing companies to bring talent into the US – to $2,000, up from $320. Nasscom, India’s IT software outsourcing industry lobby, said that the protectionist measures would increase annual US visa costs for the Indian IT industry by $200m-$250m per year.

T K Kurien, the newly appointed chief executive of Wipro, India’s third-largest IT company, told the FT. “The west preached liberalisation for many years until they realised they were being hurt by liberalisation and life changed.”

“We are really trying to reduce our dependency on the US for several reasons,” said Kris Gopalakrishnan, Infosys chief executive.

“Europe spends as much as the US on IT and we want to make sure that our ­revenues mirror that IT spend.”

Infosys, India’s second-largest IT group, earns 63 per cent of its revenues from the US. TCS, India’s largest group, derives about half its sales from the US.

Mr Gopalakrishnan also cited “a real shortage of talent [in the US]”.

“It’s not just us – most of the companies we work with say the same thing,” he said. “We are aiming to recruit 1,000 people a year in the US, but most of the skills we want in mobile technology and cloud computing are just not there. It’s a huge challenge.”

TCS has had trouble finding US employees willing to relocate for short-term projects, a core part of the group’s business model. “Mobility is an issue,” Mr Chandrasekaran said. “People don’t want to move from one city to another for projects and it’s hard to find all the talent you need in one place (city).”

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