The US State of Ohio decided to ban all its Government IT and back-office projects’ outsourcing. The other American states too might take this decision due to the high unemployment rates. More than half of the world’s top 500 companies outsource work to India, which has become the world’s back office, where western firms have set up call centers and number-crunching and software development outlets.
“There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore,” Ohio governor Ted Strickland said in an executive order.
The banned off shore locations include India. The Indian off shoring work is a whooping $50-billion industry. India, on the other hand is also facing higher visa costs and rising problems of outsourcing with other US states. The Ohio ban is a further blow to the IT industry in India. The Indian Tech industry has over the years benefitted immensely by the American firms that look forward to less wages and top rated quality performance.
Indian companies largely depend on the private projects but the trend is fast changing. The approach to business orders from the Government was a huge possibility. However, experts believe that the Ohio ban will not affect India. This is because of the marginal share of government projects in the current outsourcing pie and the faster adoption of such services by the private sector. According to estimates, currently only 5% of the total outsourcing projects are Government projects. On the other side, industry trackers mention that e-governance initiatives of the Government in future may restrict the participation of off shoring vendors in this growing pie. Also Timothy Roemer, US Ambassador said that such bans won’t affect the Indo-US ties. He said that this is not the first time that American states have banned outsourcing, similar efforts in the past were not able to create an adverse effect on the trade relations of India and the US. The ambassador said Indo-US relations have reached to a new stage which includes counter terrorism, green revolution and job creations, apart from the trade and commerce relations.
However, if other states of America will follow the suit, it will definitely cost dear to the Indian IT Industry. To insulate themselves, Indian firms need to aggressively develop the domestic markets as also diversify to other countries in a big way.
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Aditi Rindani 