Will Obama’s statements against outsourcing affect the Indian software industry?

5th February, 2010 - Posted by Rob - No Comments

In his State-of-the-Union address, US President Barack Obama has announced plans to slash taxes for American firms to generate jobs in the US. This move shows his resolve to further curtail outsourcing of jobs to India and China. Should the IT and BPO industry in India worry about this new found American protectionism is the question that runs across the Indian IT landscape.

70% of India’s software exports are for the US market. The US is the major revenue provider for the Indian BPO industry, as well. This being the case, analysts say, there is not much cause for worry, because the cost advantage that American firms enjoy from outsourcing is so huge, and cannot be completely ignored.

Secondly, Obama’s policy may very well backfire and directly affect the American public. Outsourcing software development and allied IT services has resulted in better quality products that are hugely cost-effective. If companies opt out of outsourcing and decide to create jobs within the US, then, consumers may end up paying more taxes in terms of service costs, as production within the US will cost a lot higher than production in India or China.

Also, one needs to wait and see how these policies will be implemented by the American government. How will the government monitor the movement of jobs to countries like India? Will American firms overlook the huge cost differentiator and decide to invest in jobs in American soil? Will they be able to find skilled labor just as easily within the American shores? Will these firms find loopholes in the new policy and work around it to continue with their outsourcing activities? How does the government propose to keep retail costs low when the product is manufactured in US, itself?

Most Indian software outsourcing firms and subsidiaries of American firms are taking the wait-and-watch approach with regard to Obama’s statements. How this new-found American protectionism will unfold over the coming years and how it will affect the Indian software industry is anybody’s guess, right now.

Bookmark It