Ohio ban may not hit Indian IT firms

The Ohio governor’s decision comes two days before US President Barack Obama on Thursday scrapped tax cuts for firms creating jobs abroad.

“The move by the Ohio government will not create any impact on our business as we do not have a major share in the government projects,” said an official of India’s largest software services firm Tata Consultancy Services (TCS), which has operations at Cincinnati in Ohio with 400 employees.

Tholon, an advisory and market research firm, shares the TCS official’s view that Indian companies will not be much affected by the ban.

However, the analyst feels such moves may hit the domestic market in the US as a major chunk of government works are done by the large  IT companies there who outsource their projects to low-cost regions, including India and China.

“For Indian companies, the US government projects form only a small percentage of business. But these kind of moves will not send a right signal to the market,” Tholons Vice-President Nishant Verma said.

To MindTree Ltd Vice-Chairman Subroto Bagchi, the ban is more of a rhetoric.
“Many believe the Indian IT industry has become the favourite ‘whipping boy’ for the US policy makers.

The United States government is trying to resolve an economic issue through a political posturing and they still say India is a strategic partner,” Verma said.

Another service major, Wipro Technologies, said in a statement: “These announcements seem counterproductive to the government’s effort to reduce deficit. Wipro believes in the fundamental strength of the US economy and has invested in expanding our presence there through partnerships with many.”

Though concerned of the Ohio ban, Infosys CEO & MD Kris Gopalakrishnan, said: “Infosys initiative in the public services sector is focused on creating a domestic delivery centre in the US, hence this should not affect us.”

At an event in Chennai, Cognizant Technology Solutions Vice-Chairman Lakshmi Narayanan said CTS was not worried about stringent norms from the US.

Commenting on the importance of Indian IT companies in making global firms cost-competitive, KPMG IT Director Kumar Parnkal said: “The unemployment rate and the US recovery is slow. Outsourcing is the right way for small companies to make profit. The ban in outsourcing and cutting sops will affect profitability of the companies.

“Companies looking at India as an offshore destination, always look for value as primary objective. The outsourcing is primarily helping the Americans by providing better services at lower cost.”

Earlier, announcing the first quarter results, IT biggies like Infosys, Wipro, TCS, HCL among others had said they were planning to hire employees locally.

The move by Strickland came in the backdrop of increasing unemployment in the US and also at a time when the November elections to the US Congress and Ohio governorship are drawing near.

The ban was the seen as the second blow to the Indian IT sector, the first being senator Charles Schumer’s Border Security Bill doubling fees for H1B visas.