why donald trump is spooking indian outsourcers

8/17/2019 Why Donald Trump is Spooking Indian Outsourcers

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5/1/2016 W hy D onal d Tr um p i s s pook ing Indi an outsour cer s w ith hi s fl ip- fl ops on i mm igr ati on - Ti mes of Indi a

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Why Donald Trump is spooking Indian outsourcers

with his flip-flops on immigrationET Bureau | May 1, 2016, 09.58 AM IST

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More than his 20-minute visa interview, Kaladhar Reddy

remembers a 90-minute visit to 'The Visa Temple', officially

called the Chilkur Balaji Temple on the banks of the Osman

Sagar in Hyderabad. On a Thursday evening in June 2015,

Reddy, a 20-something systems analyst, was part of a throng of

thousands jostling through the temple, seeking divine intervention forwhat would turn out to be a successful, if nervy, visit to the American

consulate in Mumbai.

For Reddy (who requested his name be changed) and thousands of others

targeting an onsite stint or, better yet, a relocation with a technology

outsourcer, divine intervention is the last-gasp step to sealing the deal.

Reddy now lives in San Francisco. But for many others, the challenges remain daunting. "The process of moving to the US was

nerve-wracking," says Reddy. "Even now, there's always a concern, at the back of the mind, about how much time you have in

the US and whether your visa will be renewed."

Still, not everyone is quaking with fear at potential changes to immigration norms — and resultant aftershocks to the visa

system. While presumptive Republican presidential nominee Donald Trump may be making shrill claims on immigration and

job losses in the US, Indians working in the country aren't overly concerned. "Trump is saying all this to get Americans'

attention," says a 30-something engineer at TCS, who is based in the US.

She does not believe much will come of his stand against outsourcing. However, she thinks, the fear Trump is tapping into is

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not unfounded. "In India, too, there are concerns in many states about outsiders taking away the jobs of locals." She can't

understand how Trump has come this far in the presidential race as no American she knows supports him.

Another Indian engineer who works with a tech giant in Silicon Valley believes that even if Trump wants to do something about

outsourcing as president, it may not be easy. "I am told getting a bill on this passed through Congress is going to be hard. Also,

if he becomes president, this may not be top priority for him."

It's not just visa

India's outsourcing industry is in the midst of a painful transition and growth has slowed — industry lobby Nasscom has

forecast 12% growth for 2016-17, down from 20% in the rah-rah 2000s — even as wildly fluctuating immigration rhetoric in the

ongoing US presidential elections, led by Trump, has muddied the waters further.

The industry has based its growth on the ability to remotely deliver software services to clients and use a small number of

employees on site to help customers roll out the software and systems they have built.

While an on-site (on the customer premises) job has been a much-sought-after perk for coders for decades, immigration and

visa norms have been a growing hindrance, with costs rising and caps being placed on their issue. In early April, the cap of

85,000 for H1-B visas (including 20,000 for students with a US master's degree or higher) was quickly hit and a lottery system

was triggered to select applicants.

Companies are aware of the immigration tightrope they walk with their technology talent. In October 2013, Infosys agreed to

pay $34 million to end a US investigation into improper use of these visas, even if the company didn't publicly admit to anywrongdoing. The company agreed to take steps to improve its internal processes and outside monitoring too. Infosys declined

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interview requests for this story.

For India's outsourcing industry, trouble is on two fronts. First, immigration concerns (which are seemingly denting the image

of companies more than its financials —Infosys says higher visa costs will result in a 0.3% erosion in margins); and second, the

essential but painful shift in strategy. With automation primed to eat into the Indian outsourcing industry's bread-and-butter

business, companies are scrambling to reboot themselves, to focus on higher-value tasks.

Industry observers admit that there are concerns on both fronts. "US elections have always been a hot potato for the Indian

outsourcing industry," says Avinash Vashistha, former chairman and MD of Accenture India and author of The Offshore Nation.

"Immigration, work visas and exports have always been an emotional leverage that US presidential candidates use to churn

emotions."

While these statements have largely been described as election rhetoric by some observers, there could be some pain for the

outsourcing industry soon.

"We can expect certain restrictive measures as a result of constant lobbying over the years," says Vashistha, while arguing thatthe industry shouldn't make any hasty move because of statements by candidates. Vashistha should know this well. For four

years, he helmed the India operations of Accenture, leading the growth in headcount from 50,000 to over 1,30,000, as the

company made India its largest presence globally.

"Indian companies have been hearing a lot of rhetoric around the immigration issue and visa... and as in the past the

companies may end up having to recruit more locally and use sub-contractors more," says Jagdish Mitra, chief strategy &

marketing officer for Tech Mahindra, India's fifth largest software exporter. "The only concerns we see are procurement feesand the complexities and cost attached to hiring attorneys (to manage any legal action around this subject). That will remain a

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painful area for our industry unless the government intervenes."

Mitra contends that proposed legislations to cap short-term H-1B visa numbers would be counter-productive. "A legislation to

cut down the number of H-1B visas by 15,000 and proposing a priority parameter for the highest wage-earner will be

counterproductive for the growth of the US technology industry," he adds. "American policy has compensated for the shortage

of skilled workers in the country with a carefully calibrated approach that balances immigration with various measures toencourage STEM (science, tech, engineering, math) education and training for Americans."

Decoding Trump

For companies like Accenture and its peers, the big challenge is decoding what Trump and his rivals mean with their

statements on immigration. For example, the billionaire candidate went, in just six months, from being a staunch opponent of

outsourcing (and the claimed job losses as a result) to offering to fly in skilled labour to the US.

"Trying to understand Trump seems to be a national pastime in the US and no one knows what he really stands for," says Peter

Bendor-Samuel, chief executive of outsourcing advisory Everest Group. "There is clearly a growing streak of populism in today's

US politics, with both Republican and Democratic parties talking about re-examining long-held assumptions around trade."

As candidates — and the future president among them — re-examine these trade norms, rules around visas and immigration

could be tightened. "What could happen is that visa laws may be changed to make H1-Bs and L1s (temporary work visas that

allow American firms to hire foreign workers) more difficult and expensive to get... this would affect the profitability of theIndian firms but not stop their progress," adds Bendor-Samuel.

Anti-India sentiment

What the Trump-led hysteria over immigration and job losses could do is worsen the anti-India sentiment, say experts. "What

Trump has done is to make racism and xenophobia socially acceptable. He is whipping up anti-immigrant, religious, and

nationalistic hysteria... this is having a negative effect on businesses and will hurt India," says Vivek Wadhwa, a fellow at theArthur & Toni Rembe Rock Center for Corporate Governance, Stanford University. "Things have changed for the worse in

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America because of this election campaign and Trump. There will be scars long after the elections are over and the popular

sentiment will be anti-Indian IT," adds Wadhwa.

While he contends that Trump has little chance of being elected US president, it is the anti-foreigner, antitrade hysteria that he

is whipping up that is harmful. "He is saying whatever the least educated and most ignorant people in the electorate want to

hear," adds Wadhwa. "Trump is a ruthless businessman himself — he does whatever he has to minimise costs and has

outsourced projects himself."

Outsourcing veterans such as Raman Roy, who sold his BPO venture Spectramind to Wipro in July 2002 and then founded

Quatrro, think that outsourcing has gone too mainstream for the industry to be impacted heavily. "In IT and BPO, close to a

million people would be working out of the US today," says Roy. "Offshoring and outsourcing are a part of life now, they are part

of the American DNA. You can rave and rant, shout and make noises, but you can't wish them away."

Despite Trump's anti-trade tirade, Roy reckons that it is premature to be bothered by his over-the-top statements. "Rhetoric is

one thing, reality is another. After all, when they offshore, it is making American companies more profitable," he adds. "It's not

like 'India is a poor country, so let's give 5,000 jobs to India'. It doesn't work that way." Agreeing with Wadhwa on Trump's

doublespeak, Roy argues that eventually companies — and not the government — will take a call on jobs.Wadhwa on Trump'sdoublespeak, Roy argues that eventually companies — and not the government — will take a call on jobs.

According to Shivendra Singh, Nasscom's VP for global trade, India's outsourcers make a huge positive impact in making many

American corporations globally competitive. "Low cost is not the rationale for bringing in employees," Singh says.

"There is a severe shortage of STEM talent in the US — the country's own labour department said there were 3.4 million

unfulfilled jobs in this field."

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Despite these contentions, India's outsourcers are hit hard, with "50:50 companies" (which have over 50 employees and at least

half of them on H-1B visas in the US), paying a higher visa fee, under the Omnibus Appropriation Act. "We protest these moves

and have even raised these anti-competitive measures with the WTO," says Singh.

Time to rejig

Away from the immigration hullabaloo, India's outsourcers are also trying to recast their businesses in these challenging times

— and the rejig couldn't come any sooner. "The Indian industry needs to transform itself before it is too late," says Wadhwa. "It

is in serious trouble."

Others such as Everest's Bendor-Samuel ascribe this struggle to advances in service delivery automation (SDA), which makes

labour arbitrage less important and the ability to embrace new technologies and ways of doing business vital. "It is highly

unlikely that Trump or (Bernie) Sanders' populism will affect the Indian industry," he argues. "But when combined with the

industry disruption being driven by SDA, it is likely that the industry is going to change over the next few years."

Companies are already racing to keep pace with these changes. Mitra of Tech Mahindra says his company is focusing on

implementation of non-linear initiatives using automation and software platforms, by enabling its clients to digitise theirprocesses and by incubating disruptive solutions internally and by partnering with startups externally.

In-house, Tech Mahindra works with a dozen "startups" and has a couple of partners outside to try and devise breakthrough

technology solutions for customers and the firm even has a start-up garage to incubate out-of-the-box thinking by employees.

Former Accenture India chief Vashistha thinks this recast — and the growing noise over visas and immigration -- is a goodopportunity for the industry to overhaul itself. "The digital transformation is increasing the demand for cloud-based services;

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driving consumers, services and businesses towards mobility; making businesses and consumers more connected through

social media; and throwing a plethora of data that can provide very valuable insights," he says. "Yes, it is time for innovation to

boost growth."

(Additional reporting by Indulekha Aravind, G Seetharaman, Ishani Duttagupta and Rajiv Singh)

why donald trump is spooking indian outsourcers

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