Indian Outsourcers Jittery After Obama Win

Senator Barack Obama's victory in the U.S. presidential election has left India's outsourcing industry feeling a little nervous. But there is the expectation in industry circles that, in the end, economic pragmatism will prevail.

In his speech accepting the Democratic Party's presidential nomination, Obama said that as president he would stop giving tax breaks to companies that ship jobs overseas and start giving them to companies that create U.S. jobs. That could spell trouble for India's outsourcers, which get most of their revenue from the U.S.

There are fears that in the current protectionist mood, companies in the U.S. that are already battling an economic crisis will cut costs by reducing discretionary work sent offshore to countries such as India, according to an analyst who declined to be quoted.

In congratulating Obama on his victory, India's National Association of Software and Service Companies (Nasscom) said it supports expanding the H-1B visa program to allow more skilled workers from abroad. As it helps to meet skills shortages in the U.S., the H-1B visa program can help U.S. companies lead the way on innovation and contribute additional jobs and economic growth in the country, a Nasscom spokeswoman says.

The H-1B visa program has previously come under criticism from some U.S. senators who say it was being used to displace qualified American workers with foreign employees. But many U.S. technology companies say the program provides skilled workers that they can't find easily here.

The uncertainty in India about the impact of Obama's presidency on Indian outsourcing was also reflected by the country's Finance Minister P. Chidambaram, referring to Obama's comments on outsourcing.

"A comment here or a comment there should not bother us," Chidambaram told reporters. "Once Obama is in office, he will realize that it is an interconnected world, and countries have to work together."

Some analysts hold that the fears may be exaggerated as a U.S. economic recovery will depend largely on cutting costs, which offshore outsourcing offers.

Obama's comments about bringing jobs to the U.S. were primarily in the context of manufacturing jobs, according to Gartner.

"In a specialized field like IT, it is not just a matter of 'choosing' to outsource overseas or not, but the issue of skills availability locally," says Partha Iyengar, a vice president at Gartner.

There is usually a lot of rhetoric in the run-up to an election, says Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International. Before pushing through any protectionist legislation, any president will have to seriously consider that outsourcing and offshoring offer direct cost-benefits to U.S. companies, and will keep the country competitive, he adds.

-John Ribeiro

Other Nations Moving Up on U.S. IT Industry

The U.S. has the world's best environment for a competitive IT industry but other countries are catching up, according to a study sponsored by the Business Software Alliance (BSA).

The U.S. retains its number-one ranking from a year ago, and it ranks in the top five in all six categories that the Economist Intelligence Unit used to evaluate countries' IT environments. But U.S. broadband infrastructure, including broadband penetration, ranks behind many countries in Western Europe and East Asia, and the U.S. is facing a shortage of skilled tech workers, the study said.

U.S. lawmakers must focus on the nation's IT needs for it to remain the IT innovation leader, says Robert Holleyman, the BSA's president and CEO. The U.S. score, based on a 100-point scale, fell between 2007 and 2008, from 77.4 to 74.6.

"A deterioration in U.S. performance is possible should tougher immigration controls have a negative impact on the pool of IT talent and the skills base," the study said. "And as the U.S. and Western European economies endure a downturn, the impacts of a heavier regulatory touch and slower growth of technology spending cannot be discounted."

Taiwan, the U.K., Sweden, Denmark and Canada all moved up in the rankings from 2007, with Taiwan jumping from number six to