Reverse outsourcing: TCS in US
Economic Times — March 22, 2008

The opening of the 1,000-seat delivery centre by India’s largest software developer TCS in the mid-western state of Ohio could not have come at a more opportune moment. It comes when the US economy is going into a tailspin and politicians there have upped the ante against US jobs being outsourced to India.

Hopefully, the new centre will help dilute some of the resentment against export of high-volume, low margin jobs to India. The significance of the “reverse outsourcing” is not lost on the people or the politicians — especially with US jobs shifting to India becoming a talking point among the presidential candidates.

The inauguration of the TCS’s delivery centre got a rousing reception from locals. And it is not because of the 1,000 jobs the centre will add, but due to the symbolism; after a decade of jobs being “Bangalored”, India’s top three IT companies are now creating jobs for locals in the US. Of course, the number of new jobs to be created is small, but when the economy is slowing and payroll numbers declining, every new job counts.

The three IT companies — TCS, Infosys and Wipro — have compelling reasons to set up delivery centres in the US. For one, restrictions imposed on the number of H1B visas issued every year hinders movement of people from India to the US to service clients. And there is a need to be close to the client.

That apart, companies have been unable to find enough skilled people in India. Delivery centres, those set up already and the ones in the pipeline, would be in close proximity to universities and therefore would be well placed to tap the available technical talent.

Clearly, Indian tech companies have been driven by commercial reasons to set up shop in the US. Besides, gains from labour cost arbitrage are slowly diminishing. Companies must diversify to new regions and gain a foothold in developed markets to emerge as global corporations.

In doing so, they must look beyond the US to markets in Europe and emerging Asia. Localisation of operations is important if India Inc wants to gain acceptance among local people and governments. Here, Indian companies must learn from experiences of MNCs that had set up back-office operations in India on managing and integrating different cultures.