Outsourcing blues: What should Indian companies do?
September 26, 2010
Now that Obama has once again come out strongly against outsourcing stressing that the 8 million Americans who lost their jobs during the recession needed succor and putting the brakes on outsourcing was one step in that direction. One may of course question the wisdom and indeed the efficacy of the move, and attribute it to populism which is aimed at garnering voter support in the coming November election; the fact is that the Indian IT sector which obtains 60% of its revenue from the US is smarting from it.
They view recent developments-raising of H-1B visa fee, Obama’s repeated assertions and finally the Ohio governor’s recent banning of outsourcing activity in the state with some alarm and there is talk of strongly taking this up with the US government. It is protectionist, unfair and does not really aid in the growth of the very US economy Obama wants to revive.
But the point is who decides what’s good for America? The Americans of course. So what can the Indians do? Take it in their stride and work around it. Firstly there is broad acknowledgment that it is not that easy for American firms to do away with outsourcing. It is not in their economic interest to do so and in fact there are those in the American industry who are vehemently opposed to it.
Secondly Indian IT companies have to learn to move from secure captive markets, and to be more innovative and offer products which are higher up on the value chain. Lastly they should look for markets elsewhere including the huge untapped domestic market which will increasingly require IT services in everything ranging from infrastructure building to cutting edge aerospace technology. As a matter of fact there is a bee line of major corporate giants wanting to sell to India everything from aircraft to guns to nuclear power plants. Now that’s a huge leverage that the Indians have with Americans and anybody else. When it comes to national interest which includes commercial interest every country is entitled to protect its own.
If India feels that it has a fair case vis-a-vis the outsourcing issue it should raise the issue at fora like GATT and WTO. The EU and the US have had many such run- ins even though they have been traditional allies. So can India. But there really is no need to get emotional and righteous about it. Nations will always conduct their policies within the confines of their political systems and their local dynamics. But trade finds a way to happen, and mutual interest is what guides it, and this is something that is never constant. It changes and re-arranges itself. One cannot be content with the statues quo but should constantly seek new opportunities. While the number one economy struggles to revive its economy and retain its preeminent status, India needs to be aware of its strength as an engine of world economic growth and should base its decisions and responses on its own innate economic strengths and potential for growth.