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Corporate Jul 5, 2012

US govt’s ‘bring jobs home’ act to hit Indian IT cos

By Firstbiz Staff

After lashing out at opponent Mitt Romney for outsourcing jobs to India, Barack Obama government plans to launch two large deals focused on the onshore model, where the projects will be managed in the US, CNBC TV 18's Kritika Saxena reports.

The deal is likely to be worth $320 million in the insurance space for software testing, infrastructure management and BPO services. The deal also comes with a mandatory 'no offshoring' clause. Analysts says that at least within the next two quarters it will hit the numbers of Indian IT companies immediately.

CEO of Offshore Insights Sudin Apte told CNBC-TV18 that the current change in policy from the US government is due to the upcoming Presidential elections. He pointed out that most IT players have stopped doing business with the US government and as long as this doesn't hit the private sector, it should be fine considering the US government has been slightly slow on contracts.

Reuters

Tech major IBM and Indian IT services giant Infosys which is also listed on Nasdaq are the likely contenders for the deal which will be spread across 6-7 years. The US government is increasingly focussing on non-offshore deals to prevent jobs moving to India.

Aside from the fact that this obviously reduces the number of jobs that could have been created, for the Indian IT sector, this means there will be substantial hike in pricing as well.

However, president of NASSCOM Som Mittal said that this change in trend does not necessarily have a huge adverse impact on Indian I-T companies.

"Many states in the US do not want work to go offshore, but that does not mean business is denied," he said. He added that there is a severe shortage of highly skilled people in the US, and that stopping work from going offshore is restrictive.

He pointed out that many Indian companies are not interested in state, provincial and federal government businesses. Expect for TCS or a couple of large players, the business that goes to the government is not big, he said. A maximum 3 percent of the total exports comes from state, provincial or federal government. "So, it will have an impact on small part of that as the rule does not apply to every provincial, federal and state government business."

by Firstbiz Staff

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