Obama, Ohio and Outsourcing

Political pressure in the US spell tough times for India’s technology companies; primarily the Ohio ban on outsourcing and Obama’s tax rebate plan for companies who are creating jobs in US.

Question is; how this will impact the offshoring business in general?
Let’s look at some facts and figures. The India’s IT export in 2009-2010 stands at $64 billion, out of which 61% business comes from US geography. Overall IT business of India estimates to 51% of the total software business of the world. There are 2.3 million jobs created in IT and close to 900 multinationals have their captive centers in India. Sizable numbers in any sense.

The fundamental reason that drives offshoring business is the skill availability, quality deliverables and the costs (70% less costly compared to locations in developed countries)

Why US government projects are important in first place?
• Business from government is fastest growing segment for IT companies
• Governments across the world are expected to spend close to $175 billion
• The IT budget of US federal government is around $35 billion

Now, is this the end of IT offshoring? Not really. While political obstacles may rise, India continues to provide key cost advantages. And the major cost saved is pushed back to US companies, so US business is saving more money. In addition to this, Indian companies have already started moving up in the value chain and have started providing key differentiator through calibrating the business processes of the customers. This would drive more savings.

After this news, worried IT companies went back to the drawing boards to redraft the growth strategies and revenue projections, but experts suggests it makes more sense to set up ‘near shore’ centers to drive more business there by creating more jobs in US.

But, really speaking, do we really need to take this? I mean, we are living in free world trade era and multinationals are allowed to do business at the cost of India companies as well? How about giving tax benefit if you don’t buy from US companies? Does that sounds good for US Inc?

I can’t stop thinking about this question, then why we need to buy from US companies?