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Anti-outsourcing stance difficult to execute

By Gouri Satya / Chennai/ Mysore
November 10, 2008, 0:08 IST
IT firms with BPO operations in Mysore have reacted cautiously to the victory of Barack Obama as the next US President in the backdrop of reports he is against outsourcing.

IT leaders in Mysore, told Business Standard, such a move is contrary to the free trade principles and difficult to execute as outsourcing is a reality.

Obama, in his political campaign, had promised tax breaks to US companies that create more jobs in the US. His statement can be interpreted that companies, which are outsourcing would not get any tax benefits. “We do not anticipate that things will change,” observed D Sudhanva, managing director of Excel Soft, a Mysore-based outsourced service provider.

“Outsourcing is a reality. Cost arbitrage is no longer the only reason for US companies to outsource to India. Scalability, talent, shorter turnaround time by making efficient use of the time difference between the two countries are the factors that will continue to drive outsourcing,” he said.

Mysore is another leading infotech company, Software Paradigms International (SPI) CEO and MD Sid Mookerji said, “Obama has made several statements indicating that his administration intends to tweak the tax system to reward organisations that do not ‘outsource’. I believe it will be very difficult to make any significant changes in this context for several reasons.”

He said it was contrary to principles of the ‘free trade’ of which the US is the biggest champion. Therefore, it will be difficult for the US to ask France to remove agricultural subsidies if the US itself is artificially influencing outsourcing via tax subsidies or penalties.

Secondly, huge investments have been made, including by major US corporations and it is irrational to roll back the clock. The largest names on the Indian IT outsourcing scene GE, IBM and Microsoft, and they are all components of the Dow Jones Industrial bellwethers. “Globalisation cannot be turned back without severely impacting US businesses and, by extension, the overall US economy,” he told Business Standard.

Finally, such a decision does not make rational economic sense. The father of modern economics, Adam Smith’s ‘Invisible Hand’ theory implies the outsourcing marketplace has developed because even though it results in moving some jobs to India, IT outsourcing and BPO also maximises the benefits for society in the US and India as a whole, the chief of SPI, a wholly owned subsidiary of Software Paradigms International Group LLC, a North American, global IT and BPO firm, with operational campuses in Mysore, added.

Pramod Rao, CEO of Nexshore, another outsourcing company in Mysore, believes “outsourcing is a need. There are greater issues to resolve to improve the US economy”. “There was a lot of hope around the world on his (Obama’s) candidacy that he would fix issues such as world peace and conflicts around the world.

Hopefully, outsourcing will remain a minor issue. We need to wait and watch,” he reacted.

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