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India's Outsourcing Economy Booms

Despite calls from Washington to keep jobs onshore, U.S. companies seem to be sending more tech work to the subcontinent, as offshoring sales spike 19%

Indian outsourcers saw strong gains last year in spite of calls by some U.S. lawmakers to penalize businesses that send tech work overseas.

India's export of IT products, mostly in the form of outsourcing services to the United States and other Western countries, increased 16.3% in 2011, compared to the previous year, to reach $69 billion in total. The country's IT and business process outsourcing sector, including exports and domestic sales, topped $100 billion in total revenue for the first time.

IT offshoring services alone grew 19%, to $40 billion, while sales of business process outsourcing (BPO) services, such as call center operations, grew 15% to $13 billion.

Officials at NASSCOM, a trade group which represents Indian outsourcers, said part of the gains were due in part to concerted efforts by India's tech industry to move beyond commodity services like infrastructure management and application maintenance into higher margin areas, such as consulting and targeted services for industries like finance and healthcare.

"Indian IT-BPO firms have matured from being service providers to strategic partners to their customers--highlighting their importance in enabling growth of customer businesses," said NASSCOM president Som Mittal, during a press conference to announce the numbers.

[ Outsourcers are beginning to hire more American workers. See India's HCL Hiring 10,000 In U.S., Europe. ]

Also, experts say the weak U.S. economy is continuing to drive companies to cut costs, a trend that helps outsourcers in low-cost countries like India.

"That's one of the primary drivers," said John Caucis, who follows the IT services sector for Technology Business Research. Caucis added that Indian outsourcers are also getting their fair share of discretionary IT spending. "We're starting to see some new investments in IT, though the outlook for 2012 remains cautious," he said.

India's outsourcing industry is continuing to thrive even as political rhetoric against the practice heats up in the White House and in Congress. President Obama in January held an insourcing summit in D.C., at which he encouraged companies to keep jobs in the United States.

And congressman Tim Bishop (D-N.Y.) earlier this month introduced a bill, the U.S. Call Center Worker and Consumer Protection Act, that would make businesses that outsource ineligible for federal loans and grants. It would also force them to disclose the number of jobs offshored.

Market watchers, however, say such efforts aren't likely to gain much traction, given the extent to which offshoring is already ingrained in most large companies' business practices and the tight supply of IT workers in the United States. "You're not going to see much political impact," said Joe Walent, also of Technology Business Research. "Getting the right people for the jobs right now domestically is too hard and in a lot of cases it's easier done overseas."

NASSCOM said it expects India's outsourcing industry to grow at between 11 and 14% in the current fiscal year.

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User Rank: Apprentice
2/11/2012 | 12:50:23 PM
re: India's Outsourcing Economy Booms
It is all about costs. The activity is politely call "labor arbitrage." The bankers, the Silicon Valley executives, and the corrupt politicians are making tons of money in the process. Not only are these people making money by sending our jobs to India, they are making tons of money by importing replacement workers from India to work in the US replacing US workers.

Barack Obama and his financial benefactors in Silicon Valley and Wall Street support what they describe as "highly skilled" workers, but instead of "highly skilled" workers, they import replacement workers, workers that make money for Silicon Valley executives by cutting labor costs, and money that Silicon Valley executives are able to pass along to corrupt politicians like Barack Obama, Bill and Hillary Clinton, and Chuck Schumer.

The H1B visa is supposed to import "highly skilled" workers, but the GAO report studying the H1B visa reports that only 7% of the workers receiving H1B visas are compensated at rates customary for highly skilled workers. The remaining 93% are replacement workers. In addition, the spouses of these workers receive the H4 visa which entitles those workers to replace US workers too. The OPT visa is an intern visa, which entitles employers to hire foreign interns, mostly from India, to replace US workers. This does not include the L1 visa, the "B1 in lieu of H1B" visa, and an entire alphabet soup of visas.

The bottom line is the Democrat Party has found a new constituency while betraying US workers. The new constituency of the Democratic Party is the billionaires from Silicon Valley and Wall Street.
User Rank: Apprentice
2/10/2012 | 8:37:04 PM
re: India's Outsourcing Economy Booms

"Also, experts say the weak U.S. economy is continuing to drive companies to cut costs, a trend that helps outsourcers in low-cost countries like India."

Methinks that one begot the other... the US economy is doing bad, in part, because we've shipped all the tech jobs offshore... furthering the excuse for business to outsource even more which in turn propels the downward spiral of the US economy.
User Rank: Apprentice
2/10/2012 | 5:20:06 PM
re: India's Outsourcing Economy Booms
I am not sure that all the American Ex IT workers that are "prerejected" from employment due to the H1B invasion would agree about the claim of "Tight Supply of IT workers"

It is far better for an Indian to work in India than to come to the US. IT is pretty much done in the US like manufacturing and unfortunately the best thing might be to offshore ALL of IT resulting in minimal need of H1Bs.

Laid off Americans who are "prerejected" and likely subject to a life of abject poverty can fight back by "Start living like a North Korean". If you lost your $70K IT job with benefits then you quite likely are never going to have a "real job" again. Only buy basic essentials to survive and fight by "sitting down" as the US economy is consumer driven.

If we all stop buying then we won't be working. If we are all out of work then maybe somebody gets the message.
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