Dealing with a protectionist Washington

Mar-5:     The Captains of the Indian IT industry could see it coming. Cut in IT budgets, delay in project allocations and a complete freeze in certain cases. Having anticipated these fall-outs of the global economic downturn, IT majors had over a year to work their way around these issues. However, the recent protectionist measures of the American administration have completely taken them by surprise. While the anti-outsourcing stance was earlier brushed aside as election rhetoric, the fact that US President Barack Obama has articulated it again (though it has not been formally passed as yet), has alarmed the industry.

What is adding to the pain is a complete lack of clarity on these issues. While Obama has openly said that companies which outsource jobs would not be given any tax benefits, it is still not clear whether he means manufacturing jobs or services jobs. On the H-1B visa issue—the latest to join the protectionist bandwagon, there are several theories doing the rounds. But, is hype overshadowing the real issue?

“The American economy was always based on free market principles. It is the first time that they are talking about measures they advocated against one or two years back. So, it is bigger in terms of its perception value rather than the real impact,” says Diptarup Chakraborti, principal research analyst, Gartner. He adds that America’s efforts to save local jobs by discouraging companies from hiring foreigners, especially those coming through H-1B visas is not a big worry.

Of the 65,000 H-1B visas issued last year, 65-70% were taken up by Indian professionals. These were spread between various industries, including banking & finance and IT. According to market estimates, between 16-18% of total H-1B visas issued were to onsite employees of Indian IT companies like Infosys, Wipro and Satyam. BPO units on the other hand send almost negligible employees on H-1B visas.

According to the latest legislation, companies which are a party to the bail-out package won’t be allowed to replace any American worker with one holding a H-1B visa. Considering that most Indian IT companies do not fall into this bracket, this is a non-issue for them. According to industry experts, even if there is a complete ban on H1B visas, Indian IT companies can easily cope with it.

“One of the alternatives to something like this could be relocating onsite Indian workers back to the country and hiring the locals,” says Viral Thakker, executive director, KPMG....