Indian IT firms go local abroad

Indian firms increase hiring in Europe and US to present themselves as job-creators rather than job-destroyers.

When Pramod Bhasin took the lead at the Indian IT Services trade body Nasscom recently, one of the first calls he made was for members such as Wipro, Infosys and Tata Consulting Services to step up their local hiring in the US and Europe. "I believe that we should be hiring in the US and thereby participate in its economic recovery," he said. "Several of our companies are already looking to create employment in the US."

After spending months lobbying in Washington and Europe to counter the threat of protectionism, India's companies are starting to do just that: stepping up hiring in the regions so they can present themselves as job-creators rather than job-destroyers. Their US and European competitors IBM, Accenture and Cap Gemini, meanwhile, are shifting in the opposite direction, swelling their ranks in India at the expense of their home workforces. The distinction between traditional IT consulting companies and Indian IT outsourcers is becoming blurred.

Announcing Infosys's results on April 15, the company said it was hiring 1,000 experienced European and US nationals this year, while putting a salary and hiring freeze on its Indian staff. Wipro will open an onshore office in Altanta in a few months, employing some 750 US citizens, and is already scouting for a second US location. In March, it said it was planning to launch a UK office with space for some 500 people. Tata Consultancy Services recently opened a centre in Eindhoven in The Netherlands, and last May set up a North American delivery centre in Cincinnati that will eventually house 1,000 staff. It aims to double its foreign workforce to 20,000 in the next five years.

Azim Premji, the chairman of Wipro, said: "Our objective would be to have our people force in Europe at least 50 to 60 per cent local Europeans and we are rapidly driving towards that. We want to build a local cadre. We generate a much stronger image for bidding for local contracts." At the same time, IBM and other international IT services companies are shifting more staff to India. In March, it emerged that IBM was laying off a further 5,000 US employees and shifting most of the jobs to India. Foreign workers accounted for 71 per cent of IBM's 400,000 employees - with 70,000 in India - at the start of this year, up from about 65 per cent in 2006. In February, IBM launched "Project Match", a scheme whereby US employees are offered the choice of redundancy or a transfer to India on a local wage package.

US and European IT services companies, which can take advantage of cheaper Indian expertise less conspicuously, stand to benefit from the changed environment - at least in the short term, says Viju George, the IT services analyst at Edelweiss brokerage in Mumbai. "It will bring a competitive advantage to people like IBM," he says. "It will make sure that some of the economic advantages for Indian companies are taken away."

Sudin Apte, an analyst at Forrester Research, says protectionism is only part of the story. The complexity and importance of the work Indian companies are now doing for their US and European clients has increased in the past five years, and it requires more people on site. Sandip Sen, the chief marketing officer at Aegis, an Indian outsourcing company, says it is becoming more important to offer clients call centre and back office services both onshore and offshore.

"We see two trends. One, if there are customers who have cost pressures, they will outsource more if they can get a better price. Then there are the customers who want to outsource but want to keep it in the US. Some of them are not looking for that only because of the political climate, [they] genuinely feel that at least a slice of customer service should be done from the US." A company that has moved even further to blur the line between the Indian and multinational IT services companies is Cognizant. It has managed to outgrow the competition - with revenues increasing at an average annual compound rate of 55.2 per cent between 2003 and 2008 - by trying to combine the local presence and industry expertise of a company such as IBM.

R Ramkumar, Conizant's vice president for marketing, says: "If you think of a pendulum, I would view the global majors on one side having deep domain expertise and strong relationship management. The Indian majors would be at the other end of the pendulum offering good delivery excellence, but with limited domain expertise and relationship management. We brought in the best of both worlds." [e-mail]