Long before Donald Trump arrived on the scene as a politician to become the President of the US, Infosys was talking about its "global delivery model" in offering software services to overseas clients led by North American companies that account for more than 60 percent of its revenues. In principle, this meant getting work done anywhere on the planet but in practice, India has been the centre from where it gets the bulk of its work done.
And so, it should not surprise us that Infosys is talking about stepping up local hiring in the US to overcome quotas on H-1B visas applied by the Trump administration. But we should take it with a pinch of salt because neither is this the first time that Infosys is talking about it, nor can it be significant enough to create a ripple in the core business. This is because the wage differentials between India and the US continues to be a key driving force, if not the dominant one, in keeping the company's profit margins high in the export-oriented business.
If anything, visa restrictions result in the increased use of offshore rather than onsite (client site) work. For efficient work, staff engaged with clients onsite work in coordination with centres like Bangalore to deliver the best results that also save on costs without pinching on quality. Infosys maintains 70 percent of the work done in offshore locations led by Bangalore, enabling it to keep healthy profit margins. Hiring more staff locally in the US would mean much higher costs.
What companies such as Wipro, Infosys and Tata Consultancy Services gain from hiring more people locally is a bargaining chip with local authorities to show that they tend to create rather than steal jobs in the home base of clients. Sometimes, local hiring or even acquisitions like Wipro's $600-million purchase of Infocrossing in 2007 are made to acquire competencies and customers -- and is not just about costs. But even in such cases, the goodwill and the image help Indian companies deal easier with local authorities and people like US Congress members.
While Infosys and the software industry as a whole are coping with technological developments including artififical intelligence and software automation, it is difficult to imagine a significant rise in local hiring in the US. Any such hire for the sake of it may be more a nice gesture to help lobbying efforts on Capitol Hill.
(The author is a senior journalist. He tweets as @madversity)
Published Date: Apr 18, 2017 08:14 AM | Updated Date: Apr 18, 2017 08:14 AM