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Indian firms too outsourcing to US

A Correspondent | May 12, 2004 12:46 IST

Indian firms are out to prove that outsourcing is not a one-way street as has been made out by the detractors of the rising trend of business process outsourcing.

The shifting of jobs from the United States to low-wage nations like India have sparked off a major row in political and business arenas. With the US presidential elections scheduled for November this year, the offshoring issue has gathered steam and is now one of the most significant planks for American politicians.

The contention has for the most part been that outsourcing is a one-way street that takes away US jobs and gives India the benefit. Studies, which show that outsourcing helps US firms remain competitive and also helps generate jobs, have been pooh-poohed by those opposed to the trend.

But some Indian companies have taken the lead in demonstrating that outsourcing works both ways, and are now outsourcing work to US companies.

Although the number of jobs that these Indian firms will generate in the US might not be too large, the pace may pick up with more and more Indian companies getting into the act. This also will go a long way in strengthening Indo-US trade ties.

Bharti Tele-Ventures Ltd in late March signed an information technology outsourcing deal with infotech major IBM, estimated to be in the range of $700-750 million for a ten-year period.

"The total deal size for the ten-year year period is likely to be in the range of $700-750 million. For the first five years, it is likely to be in the range of $250-275 million," Sunil Mittal, Chairman and Managing Director, Bharti Enterprises, had said then.

The deal is likely to create hundreds of jobs over a decade. Also some 200 computer engineer jobs will be transferred to IBM's 9,000-employee unit in India, while other work will be outsourced to IBM's French and US telecommunications units.

The deal involved outsourcing of BTVL's hardware, software and IT service requirements to IBM. The agreement specifies that payments made to IBM India will be linked to the percentage of revenue generation by BTVL and pre-defined service level agreements. The percentage-linked revenue payment is modelled to decrease with BTVL's increase in revenue.

Software major Infosys in April said it would invest $20 million in setting up a US subsidiary, Infosys Consulting Inc, which would foray into high-end consulting business.

Infosys has plans to hire 500 people in three years for the new venture, to be incorporated in Texas.

"This plan will offer us the highest chance of success and lowest risk to business," Infosys CEO and Managing Director Nandan M Nilekani had said.

Infosys, he said, has hired four global experts in consulting business from rival firms to head the business and compete with the top IT consulting firms like EDS, Accenture and Deloitte Consulting.

Infosys Consulting CEO Stephen Pratt said the firm would hire about 75 people in the United States in the first year, adding more in the next two years to bring the workforce to 500.

Analysts say there are more Indian companies ready to outsource work, and jobs, to the United States.

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