September 21, 2010 8:31 am

Indian outsourcers in US hiring push

Indian IT outsourcing companies are making a push to recruit more staff in the US, stung by tougher immigration regulations for foreign software engineers on short-term contracts who are allegedly “stealing” American jobs.

Tata Consultancy Services, Infosys and Wipro, the three largest Indian outsourcing companies, are together hiring 2,300 staff, which would increase their combined US payroll by about 13 per cent.

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S Gopalakrishnan, Infosys chief executive, told the FT that the hiring campaign, which comes ahead of US President Barack Obama’s visit to New Delhi in November, was partly a response to increasing business in the US and partly a reaction to a recent tightening of US visa rules.

However, Indian outsourcing companies could face challenges with any concerted effort to ramp up their US workforce. They had told the FT last month that scant availability of engineers made hiring difficult in the US.

Asked if the industry was worried about US protectionism, Mr Gopalakrishnan said: “Until now it has not been a factor in our business. But certainly sentiment has changed and this is a cause for concern. Hopefully, it won’t be sustained.”

The changes to immigration rules and associated increase in visa fees had raised costs, “a small impact” that companies had had to absorb, he added.

Last month, the mid-western US state of Ohio banned the outsourcing of government contracts to overseas operations, a move that sent a chill through the Indian outsourcing industry.

Infosys, which employs more than 115,000 worldwide, is increasing its currently 1,600-strong US payroll by 1,000.

TCS, which derives over half its revenues from North America, has about 16,000 working in the region, of its total 160,000 employees. It plans to increase its global workforce, of which currently only 7 per cent are foreign nationals, by 40,000 this year, adding 800 jobs in the US.

“A US presence helps TCS compete against US rivals to win some of the expected $52bn in contracts that the US federal government will have outsourced in 2010 alone,” said Ken Chan, vice president of Moody’s Investment Services.

“However, TCS’s hiring a worker in the US can cost seven to eight times as much as one hired to do similar work in India, so it has kept its permanent local US workforce at a small fraction of the global total,” he said.

Wipro plans to double jobs in its Atlanta Development Centre to 1,000 within the next three years, and about 85 per cent of recent hiring in the US has been of US nationals. The company, which employees about 110,000 people worldwide, aims for non-Indian nationals to comprise half its overseas workforce within two years.

“We have crossed the 500-person mark in the Atlanta centre. We will continue to localise our team overseas,” a Wipro spokesman said.

The move to hire more staff in the US comes ahead of a high-profile visit to India by Mr Obama. The issue of access for outsourcing companies to the US economy is likely to be one of the top items on the agenda as the US wrestles with an unemployment crisis.

Mr Gopalakrishnan said that despite the global economic uncertainty the industry would see revenue growth of 13-15 per cent this year over last year’s $60bn. This was well in line, he said, with reaching a forecast total of $300bn in 2020, as predicted in a report by McKinsey, the management consultancy.

Other analysts concur that the long-term trend of growth in outsourcing to low-cost countries like India remains firmly intact in spite of protectionist rhetoric in the US.

The outsourcing industry was doing well because some companies were now placing orders that had been delayed in the economic crisis, said the Infosys chief, while IT suppliers were developing new revenue streams in emerging markets.

But he added that economic uncertainty was a hindrance because customers were reluctant to make long-term commitments. “They are committing to a quarter or two quarters but will not commit for, say, three years.”

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