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IT sector welcomes Obama re-election

Industry players, analysts and Nasscom do not see any negative implication on the industry

BS Reporter  |  Mumbai/ Bangalore 

‘Four more years’
119 million votes and 31 million tweets later, the 2012 US election day has come to a close. As the results of the election were announced by news organisations, the posts on Twitter surged, hitting a peak of 327,452 tweets per minute (TPM).

Before President Obama took the stage to address the nation, he shared a special update on Twitter. As thousands of supporters cheered in Chicago, more than 455,000 (and counting) retweeted his celebratory message:

The $100-billion Indian information (IT) services industry has welcomed the re-election of Barack Obama as the President of the US, and expressed hope that his victory would bring in the much-needed stability in the US from a policy standpoint.

Though the industry is aware of Obama’s hard stand on outsourcing, many feel his re-election does not signal any negative implication for the industry. This was evident on the BSE IT index on Wednesday, which closed marginally up, by 0.66 per cent.

“One should not confuse election dynamics with the ground reality in the US. The US is the engine of global trade and a rapid recovery in the US will benefit the entire global economy and, consequently, our sector,” said Som Mittal, president of the National Association of Software and Services Companies (Nasscom), the IT industry body.

According to Nasscom, Indian IT companies have created over 280,000 jobs in the US and made an investment of $5 billion and contributed over $15 billion in social security taxes over the past few years.

Mittal believes India and the US will have to cooperate to address the shortage of highly skilled professionals. “It’s natural for us to do closer business with the US. Indian IT companies are now hiring local citizens. There is a realisation that we are now part of their solution.”

N Chandrasekaran, chief executive officer (CEO) and managing director (MD) of Tata Consultancy Services Ltd (TCS), agrees: “will play a strong role in driving the next phase of growth and Indian IT companies will have the opportunity to play a significant role to partner with US companies to achieve this. This will lead to further job creation in the US and other parts of the world.”

Analysts working with US companies that outsource work to Indian IT services providers also feel the US will now be in a much stable situation, at least politically. “During the election year, you do hear a lot of rhetoric against outsourcing. But the truth is that one cannot do away with outsourcing. You might, however, see some tweaks in tax laws, either in terms of providing incentives for job creation in the US or marginal changes that will take away tax benefits from companies outsourcing,” said Siddarth Pai, MD of advisory firm ISG.

Partha Iyengar, vice-president and a distinguished analyst at Gartner, also said the outsourcing rhetoric was more due to the election year. But with elections now over, it would be business as usual, he said.

Raman Roy, the founder and CEO of Quattro BPO, feels Obama’s re-election is a sure positive for third-party service providers, though not so good for captive centres of US companies in India. “One thing that he has been constantly stating is that there would be no tax benefits for companies that have profit-making units outside the US. Unlike in India, where companies have to pay tax even if they make profits in other regions, US laws exempt companies from paying taxes on profits that do not reach the US.”

A quick look at some of the US companies that have units in India will showcase why it is difficult to move back work to the US. Firms like International Business Machines (IBM) and Accenture have huge employee bases in India. According to reports, IBM’s India headcount is around 100,000. Almost two-third of Accenture’s global headcount of 251,000 is in India. Captives of banks from across the globe have been increasing their size in India. When Citibank sold its captive to TCS in 2008, it had an employee base of more than 12,000.

Ganesh Natarajan, vice-chairman and CEO of Zensar Technologies, however, feels one of the biggest positives of having Obama as the President is that it will maintain continuity. “I do not think Obama coming to power has any negative implication for India. He will try and complete the task of bringing back the US economy to growth.”

E Balaji, MD and CEO of human resources firm Randstad India, says: “The focus of Obama will be on getting the unemployment figures down and this will be his top priority. Though offshoring has been talked about widely in terms of job creation, the US will focus on those locations for employment based on the business case of the country. This would include high productivity and good quality. If India presents a good business case, jobs would be outsourced to India.”

A lone voice that continued to hold on a cautious outlook on Obama's tenure was iGate's Phaneesh Murthy, who believes his re-election is not the best news for the IT outsourcing industry. "We need to understand how much of the election rhetoric continues into 2013 and that will determine the full implications to us. The concern over the deficit and jobs will continue and in my mind, will force the sluggishness to remain in the economy."

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First Published: Thu, November 08 2012. 01:49 IST