Offshoring Evolves Beyond American vs. Indian

In the popular perception, technology jobs are either shipped off to India (where labor is cheap), or kept here in the U.S. (which helps maintain American jobs). It’s a staunchly “Us vs. Them” outlook.

But the reality isn’t that simple. As American tech companies set up shop in India, and as India IT firms open American offices – staffed by Americans – the line between what’s “American” and what’s “Indian” is starting to blur. Mike Ford-Taggart, a Morningstar analyst who covers the IT sector, sums it up: “I think five years from now we’re not going to talking about Indian IT services companies, we’re going to be talking about global IT services companies.”

No matter what country an IT services firm is originally from, he says, “If they’re not global firms, they’re not going to be around.”

In this regard the tech industry bears something in common with the auto industry. In America, Toyota is considered a foreign brand. But what’s more American, a Toyota built in a Kentucky plant, or a Ford built in a Mexican plant?

IBM – very much an American company – employs 53,000 staffers in India. (The company has 127,000 U.S.-based workers.) And a recent IBM project for Texas-based CenterPoint Energy Project included six software developers based in India combined with dozens of staffers from across the U.S.

Accenture presents a similar international picture. “We think of them as an American firm, but it’s not, it’s based in Bermuda,” Ford-Taggart says. “The CFO is out of Frankfurt, and the marketing guy is in San Francisco. There’s no place where these guys sit together and share ideas.”

Indian Beachhead

As American firms hire more Indian workers, Indian companies are hiring more Americans. Indian IT giant Wipro (which is listed on the New York Stock Exchange), in August announced it would acquire Infocrossing, a U.S. infrastructure management firm with 900 employees. (The deal is scheduled to close in Q4.)

“More and more, Infosys and Wipro are moving people to on-site [in the U.S.],” Ford-Taggart says. “Because they have H-1B visa problems, they’re hiring Americans. They send them to Bangalore for six months to be trained, then they’ll send them back to the U.S.”

Wipro just announced plans to open a development center in Atlanta, with three more in the works. The new hires will be Americans. “They’re going to hire people who have associate’s degrees, or people out of the military,” Ford-Taggart says. In other words, lower cost U.S. workers. “And as they go along, they’ll separate the wheat from the chaff, and pay for the wheat to go get the bachelor’s degree – and not ship them to India.”

It is, to be sure, an idea that sounds strange to American ears: the Indian IT firm not as “job stealer,” but as “job provider.”

However, while this is not yet a common practice, it’s becoming common. “They started doing this about two years ago. Now they’re really starting to ramp it up,” he says. In the future, as IT outfits from each region take root in their competitors’ area, the tech industry can expect far more of this.

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