MUMBAI/NEW DELHI: The US state of Ohio has banned outsourcing of government IT and back-office projects to offshore locations such as India, raising fears of similar moves by other American states struggling to cope with high unemployment rates.
“There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore,” Ohio governor Ted Strickland said in an executive order passed last month.
The move is yet another blow to the Indian IT industry, which is facing higher visa costs and rising protests against outsourcing in other US states.
Offshoring work to India is a $50-billion industry, and the Indian tech industry has benefitted immensely from American firms wanting to take advantage of its low wages and top-quality skills. The industry employs about three million people across India and has largely been responsible for the sea change in the West’s perception about the country.
Last month, the US Congress passed a controversial legislation increasing visa fees for funding the country’s Mexico Border Security program. States such as Virginia are facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms. Indian IT firms.
Last week, the West Virginia Public Workers Union filed a lawsuit against proposed outsourcing of IT jobs by the state’s office of technology.
Though Indian companies largely rely on private companies for the bulk of their business and orders from state governments are rare, that approach has slowly been changing.
TCS is the only Indian company to operate in Ohio. It employs 300 people and gets $19 million in tax credit for creating local jobs. India’s second-biggest software exporter, Infosys, has already identified the government outsourcing market as the next big opportunity and established a focussed subsidiary— Infosys Public Services, headed by Eric Paternoster—in June this year.
Rival Wipro also has a nine-year, $407-million outsourcing contract from Missouri for delivering healthcare services.
Ohio’s move adds to the perception that outsourcing is risky and that it involves serious loss of jobs. Indian companies have been at pains to point out that offshoring work actually improves the health and efficiency of American companies and government departments.
They have also been making serious efforts to hire more Americans and keep much of the work stateside. But that does not seem to have helped. The latest curb could, if replicated by other states, mean increased hiring of local staff in the US for delivering services, affecting the profitability of Indian companies.
Such measures would also make Indian firms less attractive for awarding multi-billion-dollar government outsourcing contracts, experts and officials tracking the sector said – Timesofpakistan