Bangalore: Iconic motorcycle maker Harley-Davidson Inc. and Michigan public utility Consumers Energy recently handed over contracts to Infosys Ltd and HCL Technologies Ltd largely on their assurances of local job creation—a factor evolving as a key decider in an election year in the US.
India’s outsourcing firms are battling tightened work permit regulations and a backlash in the US, their largest market, against the movement of technology jobs offshore, and this push by customers to hire more American engineers is beginning to play a role in some outsourcing decisions.
Mamatha Chamarthi, chief information officer of Consumers Energy, said she chose HCL over other firms because of its commitment to hire local engineers.
“In our business case, cost was neutral for us; it was more about our values and partnering with a firm that was committed to creating jobs in the local community,” Chamarthi said in a phone interview.
“Being socially responsible will dominate decision-making in coming years,” said Vineet Nayar, vice-chairman and the chief executive of HCL Technologies.
His company won a contract to manage Consumers Energy’s information technology (IT) infrastructure earlier this year. As part of the transaction, it opened a software development centre in Michigan with plans to hire 500 engineers over the next few years.
Earlier this year, HCL said it will hire 10,000 engineers across the US and Europe over the next five years. This is aimed at gaining local acceptance and being able to win fresh business in an increasingly protectionist environment.
Chamarthi said it wasn’t only US state-owned technology buyers that were pushing for local job creation. “We see that as a trend in the industry. It’s not that only state-run companies would want this; many private sector buyers are already part of this trend,” she added.
Indeed, HCL’s larger rival Infosys, India’s second biggest software firm, won an outsourcing contract from Harley-Davidson in July that came bundled with the promise to operate a centre in Milwaukee, Wisconsin, for the motorcycle maker.
Infosys declined to comment, citing the so-called silent period ahead of declaring quarterly results. Harley-Davidson did not respond to an email sent on Monday.
“We want to be seen as job creators and not job eaters. And if some local job creation can win fresh business, it’s a bonus,” said the chief executive at one of the top 10 Indian software exporters, requesting anonymity because his firm didn’t want to publicly admit to any pressure from customers.
In July, General Motors Co.’s chief information officer Randy Mott said his firm will bring IT jobs back in-house and create thousands of positions in the US, according to news agency Reuters. At stake are nearly $2 billion of outsourcing contracts that the automaker had signed with Hewlett-Packard Co. in 2010.
Industry experts such as Phil Fersht, founder and chief executive officer of outsourcing advisory firm HfS Research, said the US is becoming attractive for many customers.
“The US is increasing its prominence as a viable location for many buyers and services organizations, with more organizations targeting onshore delivery of IT and business services than any other region over the next two years. India comes a close second,” Fersht said.
In a July-September survey of 671 executives in the outsourcing industry, HfS Research found firms were prepared to outsource to the US for only 15% savings, as opposed to 25% from India, if service providers made those onshore offerings available.
“The net savings from offshoring continues to decrease as the services industry continues to mature,” the report said.
As Indian software firms attempt to attract more local US customers by promising to create jobs in the US, they face competition from niche firms such as Systems In Motion (SIM) that only focus on local delivery of outsourcing projects. SIM already counts Thomson Reuters Corp. among its top clients and is tapping into the local outsourcing market. “Some enterprises are beginning to favour suppliers with a significant onshore presence for a variety of reasons including tighter integration between business and IT teams, and challenges with offshore attrition and productivity,” said Debashish Sinha, chief marketing officer at SIM.
By encouraging IT vendors to create local jobs, customers such as Consumers Energy are hoping they will be able to change public opinion against outsourcing in their communities.
“When people think of outsourcing, they get a picture of many jobs going, work going to an offshore company, and then there’s unemployment created in the local community. We are redefining sourcing,” said Chamarthi.