21 February 2003 Lawmakers in the US are preparing to outlaw the outsourcing of public-sector contracts to offshore business processing centres.
The move, designed to protect local jobs in the face of mounting redundancies in the country’s technology industry, has provoked alarm in India and is also raising questions about the competitiveness of European IT services companies.
Last year, New Jersey’s Democrat senator, Shirley Turner, introduced a bill that would require workers hired under state contracts to be US citizens or legal aliens, or have some specialty for which US workers cannot be found. The bill is expected to become law in the next few months.
Now, four US states – Missouri, Maryland, Wisconsin and Connecticut – have unveiled plans to introduce similar legislation, while lawmakers in a number of other states, including Massachusetts, are said to be exploring the possibility.
The moves come despite many US states’ growing budget deficits. “We may be paying more if we have Americans doing the work but at least these people will be putting the money back into our economy,” says senator Turner.
Public-sector work accounts for only a small part of India’s exports to the US. But the states’ moves have prompted India’s $10 billion software and services industry to step up lobbying efforts in the US, worried that the sentiment will spread to yet more states and even, possibly, to other parts of the developed world.
India is also concerned that US companies will be reluctant to send work overseas to avoid complicating their dealings with government agencies. At present, more than half of the world’s top 500 companies, including General Electric and American Express, outsource business processes to the country.
India has rapidly become a major IT services centre. Local service providers including Wipro and Infosys Technologies have been hiring by the hundreds to keep up with demand. Despite the global downturn, revenue from India’s software and services industry grew 28% to $6.9 billion in the last three quarters of 2002, according to Nasscom, a local trade group.
IT analyst group Giga said in a report released earlier this week that it expects outsourcing to India to grow by 25% in 2003 because of the “incomparable quality and cost benefits” offered by the country. And a recent Gartner survey found that 70% of businesses with more than $1 million earmarked for offshore outsourcing will do so in India.
Giga’s report also predicted that China could eventually rival India as an outsourcing centre because of its “immense, inexpensive labour pool”.
