Indian outsourcing industry jittery after Obama win

India's outsourcing industry is in private a little jittery after Sen. Barack Obama's victory in the U.S. presidential election. But there is the expectation in industry circles that in the end economic pragmatism will prevail.

Obama said in his acceptance speech of the Democratic Party's presidential nomination that as president, he would stop giving tax breaks to companies that ship jobs overseas, and start giving them to companies that create jobs in the United States. (Watch a slideshow on eight ways how technology shaped the 2008 election.)

That could spell trouble for India's outsourcers, which get most of their revenue from the United States.

There are fears that in the current protectionist mood, companies in the United States, already battling an economic crisis, will cut costs by reducing discretionary work sent offshore to countries such as India, according to an analyst who declined to be quoted.

Congratulating Obama on his victory, the National Association of Software and Service Companies (Nasscom) said on Wednesday that it supports expanding the H-1B visa program to allow more skilled workers from abroad. As it helps meet skills shortages in the United States, the H-1B visa program can help U.S. companies lead the way on innovation and contribute additional jobs and economic growth in the country, a Nasscom spokeswoman said.

The H-1B visa program has previously been criticized by some senators who said it was being used to displace qualified U.S. workers with foreign employees. But many technology companies in the United States say the program provides skilled workers that they can't find easily in the United States.

The uncertainty in India about the impact of Obama's presidency on Indian outsourcing was also reflected by the country's finance minister P. Chidambaram, referring to Obama's comments on outsourcing. "A comment here or a comment there should not bother us," Chidambaram told reporters on Wednesday. "Once Obama is in office, he will realize that it is an interconnected world, and countries have to work together."

Some analysts hold that the fears may be exaggerated as an U.S. economic recovery will depend largely on cutting costs, which offshore outsourcing offers.

Obama's comments about bringing jobs to the United States were primarily in the context of manufacturing jobs, according to Gartner. "In a specialized field like IT, it is not just a matter of 'choosing' to outsource overseas or not, but the issue of skills availability locally," said Partha Iyengar, a vice president at Gartner.

There is usually a lot of rhetoric in the run-up to an election, said Siddharth Pai, a partner at sourcing consultancy firm Technology Partners International. Before pushing through any protectionist legislation, any president will have to seriously consider that outsourcing and offshoring offer direct cost benefits to U.S. companies, and will keep the country competitive, he added.

The IDG News Service is a Network World affiliate.