Obama’s Win ‘Not Best News’ for IT Industry

Many business leaders in India welcomed Barack Obama’s victory, feeling his re-election would bring stability to economic ties between the two countries.

But not everyone is happy with the status quo, with some expressing worries that a second Obama administration could hurt India’s information technology and outsourcing industry.
Mr. Obama’s victory is “not the best news for India or the IT outsourcing industry,” said Phaneesh Murthy, the chief executive of iGate Corp., a U.S.-listed IT company that has most of its offices in India, which is where most of its employees also come from.
“We need to understand how much of the election rhetoric continues into 2013 and that will determine the full implications to us,” Mr. Murthy said in a statement.
Outsourcing jobs outside the U.S. to countries like India and China was a topic over which Mr. Obama and Mitt Romney clashed early on in election campaign, as unemployment remained a major concern.
Mr. Obama attacked his Republican rival for allegedly shipping American jobs to countries like India during his time as governor and as head of private-equity firm Bain Capital, dubbing him the “outsourcing pioneer.”At the time, Mr. Romney dismissed the allegations as false.
India’s outsourcing companies earn more than half of their overall revenue from the U.S, with businesses there farming out IT support, customer care services, payroll processing, billing and insurance-claims review.
Analysts expect President Obama to continue with tough policies against outsourcing during his second term in office.
Over the past two years, tougher visa rules meant Indian information technology outsourcing companies have found it harder to relocate employees to client locations in the U.S. The Indian government has been lobbying against a 2010 law that nearly doubled U.S. visa application fees for skilled workers, a move that affected Indian IT companies more than others.
Analysts don’t expect it will get easier for IT firms to secure U.S. visas for their employees over the next four years. “I don’t think there will be significant changes in visa policy,” says Siddharth Pai, the India partner for U.S.-based technology advisory services firm Information Services Group.
“There will probably be tax incentives for companies to move more of the outsourced jobs back State-side or otherwise provide for local employment in a quid-pro-quo,” he added. India’s outsourcing companies have accelerated their hiring in the U.S. to blunt the backlash against outsourcing.

Rouf Bhat/Agence France-Presse/Getty Images

Outsourcing jobs outside the U.S. was a topic over which Mr. Obama and Mitt Romney clashed early on in election campaign.

S. Gopalakrishnan, co-chairman of India’s second-largest software exporter Infosys Ltd. 500209.BY +0.96%, said he expects the U.S. government to have less hawkish stance on outsourcing, now that the elections are over. “This is something we have seen in the elections in the past,” said Mr. Gopalakrishnan, speaking to reporters in New Delhi on the sidelines of the World Economic Forum.
R.V. Kanoria, the president of the Federation of Indian Chambers of Commerce and Industry, addressed these concerns. “We hope that the new Obama Administration will take a long-term and practical view on issues such as outsourcing which ultimately are in the US national interest because they help US companies drive down costs paving the way for expansion,” he said in a statement Wednesday.
Some didn’t feel Mr. Obama’s re-election was bad news for the industry. Natarajan Chandrasekaran, chief executive of Tata Consultancy Services Ltd. 532540.BY +0.59%, India’s largest outsourcing company, saw the development in a positive light. “Now the focus will be on driving economic growth. Technology will play a strong role in driving the next phase of growth and Indian IT companies will have an opportunity to play a significant role to partner with U.S. companies to achieve this,” Mr. Chandrasekaran said in a statement.
Some analysts believe that the rhetoric against outsourcing will die down once the heat and dust of the elections settles.
“India-based firms that manage to connect more effectively with the business agenda of their clients and build unique advantages will see strong growth in the U.S. for years to come, independent of who is in the Oval office,” said Peter Schumacher, the president and chief executive of Germany-based management consulting firm Value Leadership Group Inc.
With elections getting over, corporations in the U.S. may now move quickly on pending information technology projects, and this could help India’s outsourcing industry.
“A lot of these middle-of-the-road projects that have been essentially been put on hold or decision making has slowed, those decisions will free up,” said says Partha Iyengar, head of research at Gartner Inc. IT -1.45% in India.