Why unemployment in US is a boon for Indian IT

Layoffs in the US are proving to be a boon for Indian IT companies that are stepping their off-shore presence by increasing the local hiring in the US due to the latter’s anti-offshoring stand and the rise in visa costs.

IT biggies like Wipro, Infosys and HCL, long accused of stealing jobs in the US, are making efforts to increase their local presence not just in the US, but in countries like Germany, Canada and the UK.

According to a report in the E_conomic Times_, India’s largest software major Tata Consultancy Services is planning to recruit around 2o00 locals this year, while Wipro’s Premji wants at least 50 percent in the firm’s overseas locations to be locals.

Even Infosys, India’s second-largest software exporter by sales plans to hire around 2000 US employees in its new centre at Milwaukee, Wisconsin, by the end of this year, said a Wall Street report earlier this month as it is finding it increasingly hard to secure visas for employees they want to relocate to client locations in the US.

Already facing a lawsuit on allegations of circumventing visa laws to get workers into the US, Infosys is in desperate need of a makeover and is stepping up hiring, with a presidential elections close on its heels.

The Jack Palmer case where a whistleblower sued Infosys, created a stir in the entire Indian IT industry. Now, even smaller, mid-IT companies do not want to take a chance and prefer local talent for various projects.

MindTree, NIIT Technologies and Zensar Technologies have an increasing percentage of US locals in their workforce, as they take on staff from clients or acquire firms in the US, said the ET report.

Also local hires have a better understanding of the external environment and cultural nuances of the region, thus strengthening the understanding of customers.

Indian IT already supports 280,000 jobs in the US, including 107,000 direct jobs and over 175,000 ancillary jobs, as per a recent study by IT industry body Nasscom. These jobs were created in the last five years. The next five could see a multiple of this.

But since hiring locally is almost three times as expensive than sending an Indian national abroad, these companies will slowly start seeing revenue margins taking a hit, forcing them to rethink the aggressive margin strategy they play.