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OUTSOURCING: Not a One Way Street

July 2004
OUTSOURCING:  Not a One Way Street

Last month Infosys invested around $20 million dollars to hire Americans in U.S. to work for them. This, experts say, is only the beginning of a new trend?reverse outsourcing.

By Siddharth Srivastava

The outsourcing story so far has been one way?of Indians and Indian firms eating into jobs in the U.S. As Indian Information Technology firms reach global scales, a reverse trend is evolving?Americans are finding employment in overseas operations of Indian firms. It is being termed as reverse outsourcing and nobody should have a problem with that, even if there are elections coming around.

In the past, Indian outsourcing companies have set up offices in the United States, but they have been largely restricted to marketing, generating new clients as well as establishing a countrywide network that have created very few jobs and that too mostly for Indians. Several reports now indicate that Indian IT giants such as Infosys, Wipro, and Tata Consultancy Service have resorted to hiring western employees to deal with local populations abroad.

Last month, Infosys Technologies, which has risen to become the country's second-largest software maker mainly due to outsourced work from the West, reversed the trend by investing U.S. $20 million to create nearly 500 consulting jobs in the United States. The company has set up a subsidiary in Fremont, California to provide business consulting to American corporations. The new company, Infosys Consulting, has begun "aggressive hiring in America", Infosys chief executive officer Nandan Nilekani said in a statement.

"While the U.S. has lost thousands of jobs to low-wage countries such as India, the investment by Infosys shows outsourcing can also generate new jobs in the United States?though on a smaller scale", Nilekani said. "Hiring Americans would help in understanding the needs of the clients as well as map industry trends better", Nilekani added.

The move by Infosys comes at a time when a survey by Nasscom (National Association of Software Service Companies) and Evalueserve has indicated that the passage of jobs between India and Western countries is not a "one-way street".

"It is estimated that fast-growing Indian companies in the UK have pumped about �300 million into the British economy to date and their investment levels may increase as India becomes more prosperous", Sunil Mehta, vice-chairman of Nasscom said. According to Mehta, 441 Indian firms have set up operations in the UK, most of them in information technology. Mehta believes that about 12,000 jobs have moved from India to the UK, mostly in the services and IT industries.

Among leading Indian companies in the UK is Wipro, the main competitor of Infosys, which provides British companies with business processing operations in India. The report states that Wipro employs 590 people in the UK and that its European revenue in 2002 reached �121 million.

Infosys Technologies opened in the UK in 1996. According to the company's latest accounts, its European revenue reached �75 million in 2002. The company has 450 employees in the UK. A third Indian company highlighted is the Tata Consultancy Service, which has been in the UK since 1975. Tata has 1,000 employees in the UK.

In a statement Infosys spokesperson Chelsea Hardaway has said: "Infosys is not making the moves to the U.S. and UK to be a pioneer in reverse outsourcing. The firm's main intention is to provide affordable consulting services in the United States and the rest of the world that can draw on India's productivity. There's just been a backlash against outrageously priced consulting. Our goal is to give clients a much higher return on their investment, and to make consulting more accessible to clients."

According to observers, given the outrage against outsourcing, the use of U.S. offices for offshore companies could become a successful way to deal with the widespread misgivings. A trend has become visible in the U.S. banking sector where domestic offices of offshore outsourcing companies are coming up thus allaying fears of customers who do not want their business being managed from abroad.

Indeed, there are several other indications that show that the benefits of growth of Indian industry have percolated to the west. Recently, Bharti Telecom awarded a 10-year IT management deal worth $700-750 million to IBM. Pegged as one of the largest deals in the domestic IT market, the figures for the first five years are estimated to be in the range of $250-275 million. In addition, Bharti would transfer about 200 employees to IBM.

As is said, there is always the other side to any debate, including outsourcing.

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