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'Outsourcing industry is here to stay'

Sajan Pillai, chief executive officer and a founder member, UST Global.
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March 30, 2009

UST Global, founded in 1999 in southern California, to provide IT and business process outsourcing services is one of the largest BPO units. It offers services to 1,000 companies in 14 different countries.

Sajan Pillai is the chief executive officer and a founder member of UST Global. He was also the co-founder of Softek Systems in India.

In this email interview with Contributing Managing Editor Shobha Warrier, Pillai talks about the current economic scenario and its impact on outsourcing and on India.

You outsource work from India. How worried are you about US President Obama's speech at the Senate?

We are cautiously optimistic that President Obama and the Congress will recognize the benefits of IT services companies, like UST. Right now, all is speculation as there is no legislation pending.

The kind of protectionism advocated by President Obama is criticised by India, the European Union, etc. With your base in the US, how do you react to this? Do you call this protectionism?

President Obama is facing a myriad of economic problems. To call his solutions 'protectionism' is not giving the President the credit for assuming the mantle of leadership as he faces a struggling economy. No solution will be universally liked.

But he is taking the first steps to rescue the US economy and in so doing, shoring up those economies worldwide that depend on the US for their future growth. As a US-founded and US-based company, I don't call that 'protectionism,' instead I call it 'measured leadership.'

How many of your clients avail themselves of the relief package offered by the US government? Will the clause in that package on protecting the employment of the locals affect your company?

We are an IT services company doing business with some of the largest, most recognizable names in the business world. What they do independently of our involvement with them, is their business, and does not affect our engagements with them. UST Global is incorporated in the United States and will abide by all its laws, rules and regulations.

Have you started feeling decline in your work?

We have been fortunate to work within a variety of domains, from healthcare to energy to retail, to manufacturing, to banking, to entertainment and media. It is precisely because of our diversity that we have managed to weather the international economic situation.

Some of our clients, however, have requested changes, and we are more than happy to accede to their requests.

Were you expecting more work before recession started? Were you planning to expand then?

Certainly the recession has brought about a change in the way major corporations conduct business. In any environment, 'cash is king' and expansion plans are modified based upon a variety of factors, not the least of which is a struggling economy.

The world has changed drastically the past year, and corporate plans react to economic shifts. The major shift we've seen is that our clients are approving more small projects rather than large ones.

Do you think outsourcing per se will stop hereafter?

The IT services / outsourcing industry is here to stay. One need only to Google 'outsourcing' or 'BPO' or 'business process outsourcing' to find almost 3.1 million links to stories the first quarter of 2009, clearly showing outsourcing has become a major industry in many countries, from the United Kingdom to South-East Asia. Five years ago were one to conduct a similar search, the results would have been significantly smaller -- less than one million links the entire year!

It is clear that outsourcing has become a major industry worldwide in a fairly short time.

How will the recession affect the outsourcing industry?

The IT services / outsourcing industry will very likely react to companies facing a 30-40 per cent cut in their IT budgets, resulting in a significant shift in their sourcing strategies. The traditional pricing relationships may change to one focused on outcome, resulting in more shared or transferred risk from client to service provider. What's more, clients will seek out and require vendors who have a much deeper understanding of their business / domain.

With so many Indian companies outsourcing work for the US, how do you think will it affect the Indian IT industry?

Indian outsourcing companies must react to changes in the US in order to survive as viable companies. The industry is healthy; it's how the companies react to change that will make the difference in their eventual success or failure and their ultimate impact on the Indian IT industry.

Do you think India's dominance in IT will wane?

The IT position India has enjoyed is being challenged by many countries, including the US, the Soviet Union, China, Ukraine, and throughout, both, Latin America and South-East Asia. In order for a country to dominate an industry, it must continue to innovate.

How long do you think it will take for the global economy to get back to normalcy?

The length of the recession is difficult to quantify, as is answering when the economy will return to 'normal.' When an economic bubble bursts, perspectives change, and what was once important is no longer. For all those who have been adversely affected by the economic downturn, I sincerely hope the recession ends soon.

Do you see China, India and Brazil emerging stronger after this?

As I said earlier, the countries that adapt to change and are on the cutting edge of IT innovation will come out of the recession stronger than before. Any number of countries could emerge stronger but that's up to their governmental leadership and the strength of their IT industry.

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