Is Vishal Sikka the new Indiana Jones for India's IT industry, conquering the Wild West with his adventurous ways? Is he taking the "Out" out of "Outsourcing" from the US?
The Infosys CEO has walked his talk by announcing that his Bangalore-based company will hire as many as 10,000 workers in the US, and set up four technology hubs, including one in Indiana. The immediate link of this step is to President Donald Trump and his protectionist postures evident in the capping of H1-B work-permit visas and some muscle-flexing by a presidential aide and others recently that Tata Consultancy Services and Infosys were among those "gaming" the US visa regime to bring in more workers into the US through dubious means -- a charge vehemently denied by the National Association of Software and Service Companies.
The immediate concern is that Infosys may take a hit on its profit margins because US-based workers may cost more than Indian counterparts flown into the US as "onsite" workers. But there may be more to this than it appears. Here are three ways Infosys will likely gain by setting up its promised four technology hubs.
1) Better bargaining power for future visas: There is a possibility that steps by Infosys to hire more workers in the US pleases officials in Congress and Capitol Hill and smoothens issues for medium-term improvements in the visa regime. The step will provide ammunition for Indian lobbyists to convince the Trump administration that it should not be overdoing visa restrictions.
2) The focus is on innovation, not wages: Sikka, who was a high-tech lynchpin at German software giant SAG earlier, is a man known for innovation and the Infosys statement on new hiring talks not about simple implementation or maintenance of software packages in the US in an old-world way but entering new areas including big data, analytics and artificial intelligence with an emphasis on innovation.
A key focus area is artificial intelligence, in which there is considerable scope to create intellectual property and productivity-boosting solutions. For Sikka, the Trump policy may be a blessing in disguise because his heart has always been in product development, and the right kind of hiring in the US can take Infosys to an innovation-driven approach to the company's "global delivery model" rather than a cost-based approach in which "capacity utilisation" and "offshore-onsite mix" have been the mantras to squeeze more work or profit out of an army of techies now numbering more than 200,000. It is significant that Sikka's hiring announcement comes within a week after Infosys launched "Nia", an artificial intelligence-based platform. a year after launching another AI platform, Mana.
Techies working on such platforms may be likened to car drivers given a larger vehicle that can carry more passengers -- which means their productivity is higher.
3) Embracing of software automation and robotics is changing the business model: The old "time and material" based calculation of profitability may give rise to a more complex measurement of outsourcing-based IT engagements. Analysts may need a new approach to measure Infosys profits in the coming days, with a higher weight for intellectual property-based project pricing or licensing revenues.
It is an open question whether the same innovation that Infosys is planning to do in the US can be done cheaper in India. The answer may be a no. In cutting-edge areas where computer science graduates and PhDs are preferred to simple code jockeys, even India-based techies command premium salaries as part of a global war for talent. Companies including Amazon, Google and Microsoft compete for such R&D-oriented talent.
Whatever the detail, Infosys may anyway be doing a sufficient amount of innovation to significantly alter its traditional approach.
Remember, Sikka is based in the US himself. The least he has done by blending high-tech platforms with increased US hiring is to buy himself time to take on boardroom critics and showcase his special skills.
(The author is a senior journalist. He tweets as @madversity)
Published Date: May 03, 2017 07:02 AM | Updated Date: May 03, 2017 07:02 AM