outlook for the Indian information technology (IT) sector is 'cautiously positive' in 2018 with global and
U.S. economies improving, according to Indian IT body, NASSCOM.
India’s $154-billion information technology sector so far has been battered by
a broader slowdown in technology spending, while uncertainty looms over work
visa rules in the U.S., the biggest market for Indian software services firms,
and growing protectionism across multiple countries across the globe.
the longest time, the U.S. was the largest as well as the most dominant market
for the $154-billion software services industry. However, the increasing
changes in the visa norms, especially H-1B, have been making it more difficult
for companies to employ skilled foreign nationals to fill critical skills gaps
in the U.S. In fact, according to National Foundation for American
Policy, the top seven Indian IT companies experienced a whopping 43 percent
drop in their H-1B visa approvals between 2015 and 2017.
stress is visible in the case of revenue contribution of the U.S. to the company’s revenues
too. For instance, U.S. opportunities contributed to 56% of TCS’ revenues at
the end of September 2016, which has fallen to 54.1% at the end of September
2017. In the case of Infosys, the number is down from 61.5% to 60.6% during the
same period, while for Wipro, it has fallen from 54.8% to 53.6%.
is interesting is that, according to the report by National Foundation for American
Policy, the share of H-1B visas to Indian companies in FY 2017 equalled a
miniscule 0.006 percent of the 160 million-strong U.S. labour force. One may
question the impact and need of such protectionist measures and the timing,
especially with a parallel reality also staring at the industry: the growing
importance of cloud computing and artificial intelligence, which require fewer
workers to be onsite, according to the same study. Indian IT companies have
been working on two-pronged strategy to tackle this situation for some time.
Related: India's Dispersed Workers Mean Large Talent Pool for Mobility Hires
Indian players Infosys, Wipro and TCS have been aggressively ramping up their presence in the
country and stepping up local hiring, either setting up local innovation centres
or tying up with local universities to work in newer technology areas. Infosys
plans to hire 10,000 people in the U.S. in next two years and has plans to set
up four innovation centres across the country. Wipro already has 55% of the U.S.
workforce that is local. TCS recently partnered with Cornell Tech to set up
Tata Innovation Centre on its campus last year, following a $50 million
investment from TCS.
flip side to this strategy is that Indian IT companies, at the same time, do expect
an increase in their billing rates for their clients, as salaries for H-1B visa
holders are rising. The cost arbitrage edge is weakening and, ultimately, companies
will have to be pass the increased costs on to the clients or they will need to
be prepared to take a direct hit to their margins.
While the U.S. still
contributes to two-thirds of the sector’s revenues, over the past few quarters
it has been countries in Europe – especially in Continental Europe – that are
bringing the maximum growth.
a lot of pressure, U.S. growth rates have reduced to single-digits for top IT
companies. Meanwhile, Europe is growing at a much faster
Related: Innovation Top of Mind for India's Business Community
the last year alone, at least 20 development centres have sprung up in
countries like Poland, Romania, Bulgaria, Hungary, Austria and Ireland. For
example, Infosys added its newest facility in Karlovac in Croatia and Wipro set
up a specialized automotive centre of excellence (CoE) in Timisoara, Romania
last April. In addition, HCL has 4,500 employees in Europe today. For the past
several quarters, IT firms’ European business has been growing substantially
faster than the U.S. business overall.
this translates into a growing need to find the right talent, which is mobile,
adaptive and highly skilled, in many more countries. It requires the mobility team
to be agile and be ready with a talent ‘pipeline’ which is ready to dream
beyond the ‘American Dream’, which is available to be deployed in multiple more
is going to define the rules of the battle and the competitive advantage. One
such cornerstone of this strategy deployment will be managing costs. The Indian
IT success story is based on labour cost arbitrage. It will be imperative for the
mobility teams to monitor cost projections as well as track actual costs on a
regular basis and closely work with not just the business teams, but also the rewards
teams as well and in multiple countries. The need of the hour will be to continue
to closely monitor the ratio of local vs. on-site assignee and on-site team pyramids,
with a larger base of local freshers, to drive home cost optimisation and
the end of the day, no IT company would like to risk taking a hit to their
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