US President Barack Obama rode to power on the promise of stopping American jobs from being outsourced to India.
Ironically, the Indian IT and IT services companies targeted by him may actually be bailing out unemployed Americans by hiring thousands in BPO jobs, in a US economy still struggling to cope with the aftermath of the worst recession since World War II. Outsourcing has come full circle.
Take Aegis, the BPO arm of the Mumbai-based conglomerate Essar Group. Aegis is one of the largest Indian employers in the US. It has over 5,000 US citizens on its payroll and plans to hire 10,000 more over the next three years.
“We have 10 centres operating in the US and more than 97 per cent of our employees are US citizens. Our clients are happy to have locals attend to their calls and we will be hiring many more,” said an Aegis spokesperson.
Infosys, India’s second largest IT company, plans to hire 1,500 workers in the US, its biggest market this fiscal. Apart from BPO companies like Genpact, Aegis, TCS and Wipro, too, already have large centres in the US, with thousands of Americans employed.
The term “Bangalored” — coined by the US media to describe offshoring of services (and jobs) to India’s Silicon Valley — has been made to stand on its head.
“Indian IT companies have come a long way. But I will not call this outsourcing, but rather call it local hiring,” said Ameet Nivsarkar, spokesperson for India’s IT trade body Nasscom.
“Many Indian IT companies are looking at local hiring as they are expanding their operations overseas. This is a very positive trend for the Indian IT sector,” Nivsarkar added.
One reason for this is the rising costs of IT services staff in India, which has made the average US call centre employee a relatively less expensive proposition. The soaring unemployment in the US has made it possible for Indian firms to hire US citizens at cheap rates. Struggling residents desperate for work are happy to take a call centre job paying around $14 an hour.
The option of working in shorter shifts, and other incentives like a free holiday trip to India, also help to attract local talent, a Genpact executive said, wishing to stay unidentified since he was not the official media spokesperson.
“It is a good deal. Hiring locally not only helps us to retain our US clients but also helps us to understand the market better. And with high unemployment, it is easy now to get talent locally,” he added.
Political pressure in the US and providing certain level of comfort to US clients are also major factors. There is also a business incentive. Many recession-hit local governments are offering tax breaks to companies that provide local jobs. For Indian companies, the tax saving helps them stay competitive despite hiring relatively costlier US workers.
Problems caused by rising visa restrictions in the US are also forcing Indian firms to increasingly rely on local workers. With many Indian IT services companies bidding for US government jobs- at the federal, state and local levels- promising to keep the jobs in America can often prove to be the clincher.
Aegis, for instance, gives an option to the client to either go for service by locals with 15 to 20 per cent cost saving, or 45 to 50 per cent cost saving by taking the job offshore to India or Philippines.
Many firms opt for the former to prevent job loss and stave off any potential political backlash. “The US became the fastest-growing location for us last year. We expect that to continue this year,” Genpact chief executive V. N. ‘Tiger’ Tyagarajan had told Daily Mail.
Harish Bijoor, a brand consultant and BPO observer, said, the cheap US worker was a myth. “$14 per hour boils down to something around $112 (Rs 5,000) a day, and that is a decent wage for Indian BPO employers,” Bijoor said. The real benefits, he says, are in the local knowledge, efficiency and increased ‘socialisation’ US workers provide. “It is a positive development for Indian outsourcing industry,” he said.
“We don’t buy this statement (on cost effectiveness). We look at value-based platforms and business rather than just commoditised services,” said D. Swaminathan, chief executive officer (CEO), Infosys BPO, which gets a good percentage of revenue from its US business.
Infosys is hiring fresh graduates in the US as a matter of policy.
“Hiring from campuses in USA is an important part of our globalisation strategy,” notes its US website. The hiring process covers engineering universities, liberal arts colleges and business schools. Recruits go through classroom or hands-on training or both.
“Most of the multinationals hire locally to strengthen their base. As Indian IT companies look at larger markets and move up the value chain, it makes sense to include local people,” Nivsarkar said.
Indian companies have also seized the chance to take the fight to US firms which are also ramping up operations in India. US firms like Cognizant, Accenture and IBM have large operations in India, offering offshore services to global clients, the Washington Post reported, so “Infosys, Tata Consultancy Services and Genpact have had to move into the culturally uncomfortable area of managing Americans”. However, another reason that has forced Indian companies to hire people overseas is the high wage inflation, higher attrition rates and often, the unavailability of the right talent.
“As the IT companies are growing, it is getting difficult to get and retain talent. Also, their training and visa costs are high. IT companies have seen the highest wage inflation,” said E. Balaji, CEO of Ma Foi Randstad, a leading global recruiting firm. “It makes sense for companies to hire overseas as the net cost gap is often marginal,” Balaji said.