By Hemant Jain
YESSS…It is INDIA who is creating more jobs in the US than the other American IT companies. And it is now official.
Although India had the reputation of raising employment only in the US, but now India is even providing job opportunities around the globe. With HCL Technologies announcing 10,000 jobs for locals in the Canada and Europe, India Inc. chose the WEF (World Economic Forum) meet to send a strong message that Indian IT firms are creating and not stealing jobs in troubled western economies.
Also, a message emerged from British Prime Minister David Cameron’s advice to the European Union (EU) that instead of being a threat, the emerging economies like India can be of great help to Europe. Concluding a Free Trade Agreement (FTA) with India by the year-end would be in Europe’s interest, he said.
Chairman of Mahindra Satyam Vineet Nayyar hinted at creating jobs in the western economies from where they get bulk of business. “Indian firms when they go overseas will have to create jobs there. We will certainly do so,” he said.
Indian IT companies have a better record of creating jobs in the US over the past several years compared to their American peers like DELL, IBM and Accenture. Yet the proposed US immigration bill seeks to penalize Indian IT and benefit American IT companies, reported brokerage firm JP Morgan.
In the past decade, Indian IT companies are estimated to have added approximated 30,000-40, 000 jobs in the US, that too excluding green card holders. But IBM has reduced its workforce in the US, and Accenture’s addition to its US workforce has been marginal.
In contrast, IBM added 1 lakh people in the last seven years, but all of it overseas. Its headcount in India rose from 36,000 in 2005, to an estimated 1, 35,000 in 2012. Some believe it might be closer to 1,50,000 now. “India continues to remain a primary destination for global delivery and it’s not surprising to know that US companies are adding headcount here,” says Siddharth Pai, partner and president of the Asia Pacific region in the advisory firm, Information Services Group (ISG).
“IBM’s focus seems more on margins in the face of stagnant top-line trends; workforce re-organization towards offshore/lower-cost markets (such as India) and away from the US is perhaps one way of accomplishing this,” write Viju K George and Amit Sharma of JP Morgan .
However, between fiscal 2006 and fiscal 2013, JP Morgan estimates that Indian IT added 38,000 locals to its US workforce. And the number is expected to touch 50000 in 2014.
George and Sharma point out how the Senate-passed immigration bill allows firms like IBM and Accenture to avail themselves of H-1B visas (as they are not in violation of the onerous outplacement clause) even as they reduce their employee headcount in the US or are not organically creating incremental jobs for US citizens.
The outplacement clause imposes significant higher filing fees and higher wages for H-1B dependent employers based on the percentage of non-immigrants employed in the company. Since companies like IBM and Accenture have low numbers of employees on H-1B relative to their total US workforce, they escape the higher visa costs. On the contrary, since Indian IT companies have high numbers of employees on H-1B relative to their total US workforce, visa costs go up significantly for them.
But maybe there’s still a silver lining. “It could hurt Indian IT companies in the short term, but they could become true multinationals in the long run, adding more locals to their global workforce,” said Pradeep Udhas, partner & head for IT/ITES in KPMG India.
Apart from this line of thought, one question might linger on our minds that instead of creating jobs worldwide, why doesn’t our economy first solve its own problem of unemployment?
Well I would answer it this way that Indian IT industry, which rakes in about $60 billion revenues from overseas markets, depends significantly on outsourcing of business processes of the Western companies. Hence it is always a give and take relationship. If we want to derive something even we need to give out something. But the crucial fact remains here is that the work assigned to India BPO’s is much more complex than our foreign counterpart’s work. Hence more of BPO based projects are handed over to India. Analysts believe that India remains a vital destination for outsourcing and expect its annual GDP to grow at 8-10% for the next decade. In a bid to boost its revenues from newer markets, Indian BPO firm First source Solutions is stepping into new geographies like Australia and the Gulf region. “We are looking at diverse geographies and Australia and the Gulf region look promising,” said a top company official.
With a downturn in the large, traditional markets of the US and Europe, more outsourcing firms are scouring opportunities in new markets to maintain revenue flow and thus creating a cycle of flow of employment not only in India but throughout the world.