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From H-1Bs To Growth: Why Wipro's Buying Into The U.S. IT Market

The Indian company's in the middle of buying a U.S. data center management company and plans to open as many as four software development centers staffed with local hires.
DIFFERENT APPROACHES

The Wipro and Caritor deals are different, but both suggest a global IT services industry where vendors need to have more of a local commitment.

Caritor was a small company that, while officially based in the United States, was staffed nearly entirely by Indians doing remote software development, the only exception being people at U.S. customer sites. It didn't even have a U.S. sales force. Keane had a strong U.S. presence that included services such as business process outsourcing and infrastructure consulting. The new company--which kept the Keane name--has no plans to add U.S. software development facilities. "We've already got that presence," says executive VP Sandeep Bhargava.

Other outsourcers don't see the point in mimicking Wipro's U.S. expansion. Syntel, a U.S. outsourcer that does application development, integration, and BPO, has 90% of its 10,000 employees in three main development centers in India, says CEO Bharat Desai. Aside from "culturally aligned" teams on site in the United States, Germany, and other countries managing customer engagements, Desai expects Syntel to stay focused on Indian-based delivery. "We've invested tens of millions of dollars developing robust delivery of services on the back end," he says. He doesn't anticipate a shortage of IT talent in India, despite rampant hiring by much larger companies. "There will be competition but not scarcity of talent in India," he says, thanks to a large and growing population of young people seeking tech-related degrees. In the United States, Desai sees the opposite: a severe shortage of tech talent looming, especially as baby boomers retire and take with them knowledge of "tens of millions of lines of legacy code." Supporting those systems is better suited to offshoring. "The U.S. is an innovative economy," he says. "I can't see young people wanting to do that work."

Still, every Indian outsourcer, Syntel included, is trying to move to higher-value, higher-margin work. Areas such as product development likely will mean more on-site client work. Even so, Syntel will keep development work offshore to keep costs down. "Our teams would work with the customer to figure out what frontier of innovation they want to attack," Desai says. "But once that's decided, the execution, testing would be done in India."

Politics is never far from the surface with offshore outsourcing. One hot button is whether U.S. politicians should raise the cap on H-1B visas. That cap was reached in just two days this year, in part because outsourcers flooded in requests. U.S. workers maintain that those employers don't try hard enough to find local talent or aren't willing to pay market rates.

The growing demand for H-1B visas is becoming a business risk for Indian IT companies, not just a political hot potato. In their Securities and Exchange Commission filings, the largest Indian companies all cite as a major risk the possibility of not getting enough visas to serve clients abroad. Wipro's Ramasubbu acknowledges there may be business and political advantages in adding U.S. employees. "This helps on the planning and image side, definitely," he says.

A couple of thousand U.S. employees won't end all criticism of Indian outsourcers. But they'll add to the increasingly complex picture that makes up the global IT services industry.