India’s IT aims to soften image as Obama visits

By Tony Munroe and Peter Henderson

MUMBAI/SAN FRANCISCO, Oct 27 (BestGrowthStock) – U.S. President
Barack Obama’s visit to India puts the spotlight on its $60
billion IT sector, which argues it is a creator of jobs in the
United States and should not be blamed for high unemployment.

An increase in U.S. visa fees, a ban on offshoring by the
state of Ohio and the industry’s portrayal in campaign ads as a
drain of U.S. jobs has set a frosty tone ahead of Obama’s visit
to India in early November.

Obama is expected to visit Mumbai, India’s financial hub
and the centre of the 2008 militant attacks. U.S. officials say
much of the trip’s focus will be boosting trade that is
expected to double in five years from the current level of $50
billion.

But it is a sign of the times that Obama is not expected to
visit Bangalore, the country’s technology hub. Nor is he
expected to visit Hyderabad, another Indian IT hotbed, where
his predecessor, George W. Bush, stopped in a 2006 visit.

“It is a worry, there’s no question, but the worry is more
about unemployment, not about the political rhetoric,” said
Pramod Bhasin, chief executive of outsourcer Genpact Ltd (G.N: ).

“We as an industry have to help create jobs in America and
we have to communicate that much better than we’ve done in the
past,” said Bhasin, whose firm employs about 2,000 in the
United States and expects to double or triple that over the
next two to three years. Three-quarters of Genpact staff are in
India.

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Obama’s fellow Democrats are expected to take a drubbing in
the Nov. 2 balloting amid unemployment stuck near 10 percent.

In California, where the jobless rate tops 12 percent,
Democratic Senator Barbara Boxer accuses her Republican rival
Carly Fiorina of sending jobs abroad when she was chief of
Hewlett-Packard (HPQ.N: ).

Legislation that would end tax breaks for firms that create
jobs and profits overseas was thwarted in the Senate, but a new
rule raising the cost of certain visas to enter the United
States, part of a border security bill, will cost Indian IT
firms $200 million and sets an ominous precedent for the
industry.

“It has nothing to do with immigration, but it has had an
impact on the costs of IT services companies from India. That
is the kind of legislation that worries us,” said S
Gopalakrishnan, CEO of sector bellwether Infosys Technologies
Ltd (INFY.BO: ).

SUCCESS VICTIM

India’s IT services industry, which generates 70 percent of
its revenue from the United States and accounts for 5 percent
of India’s economy, is a victim of its own success.

Before the global economic downturn, the sector was growing
by roughly one-third per year as companies across industries
shipped commoditised work to India and elsewhere to cut costs.

U.S. blue chips from Intel (INTC.O: ) and Google (GOOG.O: ) to
Cisco (CSCO.O: ) and Microsoft (MSFT.O: ) have substantial
operations in India, which is increasingly a research hub for
Silicon Valley. IBM (IBM.N: ) alone is believed to employ more
than 70,000 in India, although it would not confirm that
figure.

While China’s emergence as an industrial powerhouse has
spawned U.S. backlash over lost manufacturing jobs and a weak
currency that keeps exports cheap, India is associated with
armies of young engineers and service staff working for
one-fifth to one-third the wages of American white collar
workers.

For India, the IT boom has created a world-leading industry
that has been culturally transformative in a tradition-rich
country, employing two million people working in modern offices
and buying cars and apartments.

Outsourcers say they enable clients to innovate and
compete, providing skills not readily available in the United
States.

“There is a huge dearth of software engineers in the U.S.,
and a large part has been mitigated by offshore work,” said
Aparup Sengupta, managing director and global chief executive
of Aegis Ltd, an IT services firm owned by the Essar
conglomerate.

The perception within the United States is often less
benign.

In an episode of “Outsourced,” a new U.S. comedy TV show,
bricks are thrown through the window of an American call center
that has transferred its work to India.

JOB CREATION

Indian IT industry players say they are not to blame for
U.S. job losses, and instead talk up creation of jobs both
directly and indirectly in the United States.

“Job losses are not due to outsourcing. They’re due to
subprime, they’re due to the financial mess, they’re due to
lots of other things,” said Bhasin of Genpact, which this year
bought an operation in Illinois from Walgreens (WAG.N: ) as part
of a deal to provide accounting services for the drugstore
chain.

Outsourcing work to a lower-cost U.S. site can save roughly
20-25 percent, while moving work to India saves 70 to 80
percent.

Last year, Infosys announced a plan to hire 1,000 employees
in the United States and said it has made nearly 300 job offers
since then. Of 122,000 Infosys staff, over 2,000 are
U.S.-based.

“We think there are perceptions and myths today, and these
need to be corrected, because it’s not about jobs moving to
India, its about our creating jobs there,” said Som Mittal,
president of Nasscom, the trade body for the Indian tech
sector.

Anti-outsourcing talk may cool after next week’s elections
but could reemerge with greater intensity in the run-up to
2012, when Obama will be up for re-election.

“In February, no one is going to be talking about India,”
said Derek Scissors, a research fellow in the Asian Studies
Center at the Heritage Foundation, a conservative think tank in
Washington. “But what about 2012? That’s a different story.”
(Additional reporting by Bharghavi Nagaraju in BANGALORE;
Editing by Alistair Scrutton and Sanjeev Miglani)

India’s IT aims to soften image as Obama visits