IT firms cautiously optimistic

Within the IT industry, reactions to Barack Obama’s historic victory have not been as pessimistic as expected. IT firms have been worried because Obama, as Senator, introduced the Patriot Employer Act of 2007 that gave tax credits for companies that maintain or increase the number of full-time workers in America relative to those outside the US.

Today, however, industry body Nasscom has been quick to play down these apprehensions. Meanwhile, N R Narayana Murthy, chief mentor of Infosys Technologies and grey eminence of the industry, said, “We believe President-Elect Obama to be a pragmatic leader who understands that American industry needs to be competitive not just in America but in third countries as well."

Indian IT firms and analysts are hopeful that President-Elect Barack Obama's term in office will be able to bring in political stability and hasten the banking, financial services and insurance (BFSI) sector's recovery. The sector accounts for nearly 40 per cent of the Indian IT sector’s revenues. They are simultaneously wary of Obama's statement of taxing companies that outsource and the possibility of limiting the workforce through visa approval. These are matters of concern since the US accounts for around 45 to 60 per cent of the total revenue of Indian software exports.

The reactions were varied. Bill Gates, chairman, Microsoft, who is currently in New Delhi, said: "IT companies in India are doing projects with Microsoft and will continue to grow and invest in the long-term. They have an incredible reputation."

“Implementation of taxation is practically impossible, and it appears to be an election-centric media statement,” opined S Sabyasachi, senior director, neoIT (an offshore advisory firm). “Besides, when there is a recovery in the economy, there is a lot of advantage for outsourcing. We saw that after the dotcom bust,” he added.

Nevertheless, Obama’s win will bolster American sentiment and push the restructuring of the economy on track, opined Ganesh Natarajan, Chairman Nasscom and deputy chairman and MD Zensar Technologies.

Som Mittal, president, Nasscom, added, “Of the 85,000 H1B visas issued last year, India received only 12,500. Besides these are not just the Indian firms that are applying for these visas. Several multinationals that have centres in India are also opting for this. So even if they do not increase the limit it does not matter much.”

There is widespread agreement that Obama’s comments about bringing jobs back to the US were primarily in the context of manufacturing jobs and not about outsourcing specifically. The other issue is that in a specialised field like IT, it is not just a matter of choosing to outsource overseas or not, but the issue of skills availability.
 

IT’s A WORRY
BAD	No tax deductions for moving operations overseas
BAD	Public contracts only being awarded to companies committed to American workers
UNCERTAIN	Supports only temporary increase in H1B visas
GOOD	Banking and financiaI services sector may look up since financial stability will return

“It is increasingly clear that in many areas the US does not have sufficient skills to address all the needs of US enterprises,” opined Partha Iyengar, Vice President and regional research director India, Gartner.

Those who differ, however, note that some of the outsourcing deals in the US government space that were expected to come to India especially after the Indo-US civil nuclear deal, may not materialise now, considering the Democrat stance on the issue, and that Obama was not party to the deal.