Tarun Reflex

November 11, 2008

Obama can’t overlook Indian outsourcing industry

Can US president elect, Barack Hussein Obama, afford to lose billion of dollars they get from Indian outsourcing industry in the current Joys and woes of US Elections financial meltdown by cracking a whip on Indian outsourcing industry? Well, going by the initial trends of the IT sector after the election results in US, the outsourcing industry in India seems assured that the US economy can’t overlook them.
Over 80 per cent of the BPOs and call-centres in India are regulated by the US companies–the main pillar of Indian outsourcing industry.
According to NASSCOM, the outsourcing industry is growing at compounded annual growth rate of around 37 per cent over the last few years. BPO exports have been the fastest-growing segment of the Indian IT-BPO sector. They have grown from $3.1 billion in fiscal 2004 to $11 billion in 2008 and currently account for 37 per cent of the global business process offshoring pie. They sustain an employee pool of more than 700,000.
Indian BPO vendors have relied largely on English-speaking geographies as their markets. North America and the UK together account for about 87 per cent of their export revenues. North America, primarily the US, accounts for roughly two-thirds of the market alone.
There were lot of panic which reflected in share prices of Indian IT companies after Obama during his presidential campaign had made some controversial remark on outsourcing of American jobs to India.
“As the subsequent US governments had worked in past I don’t see any major shift in its business plan during Obama’s tenure. All the US government has always worked in the favour of business community and besides that, Indian resources has always helped US economy,” Tejas Doshi, head, Sushil Financial Consultants, said. 
“If Obama wants also to reduce the outsourcing from US he wont be able to do it for the reason that if you compare the US resources and Indian resources the latter is much more productive and cost effective so as long as Indian resources remain efficient they will be in business,” he added.
IT analyst from Khandwal Securities said, “The importance of Indian outsourcing industry to American economy is enormous. If Obama wants also to put a brake on outsourcing he wont be able to do it as he knows how much revenue the US gets from Indian IT, ITeS and BPO sectors”.
Even US-based companies such IBM (40%) Accenture (25%) have sizeable workforce in India.
Many analysts are also of the opinion that even if Obama wants to force an anti-outsorucing law all these global companies which are based in US will stand in his way as their back office operation are much more dependent on outside markets like India.
A CEO of a US-based leading BPO centre who doesn’t wished to be named said, “Obama had made some promise to people on outsourcing. But the strong industrial lobby will surely not want them to fulfil. It will be tough for Obama to ignore them, only if he’s not desperate.”
“Moreover, the availability of skilled labourers and high cost is an issue in US and in the present economic downturn Obama cant afford to go ahead with anti outsourcing stance as his own economy will suffer,” he added.
However, analysts feel that once Obama takes the presidential office formally in January there might be some announcement related to outsourcing as he has promised during his election campaign which could affect IT industry in the short term and there might be some knee-jerk reaction in the stock market.

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