Indian IT companies turn job creators in overseas markets

Far from being accused of taking away jobs from countries such as the US, Indian information technology firms are now beginning to create jobs in these countries.

Companies such as HCL Technologies have plans to create 10,000 jobs by 2015 in the US and European markets and others like WNS Holdings Ltd has announced to set up an office in Columbia, South Carolina from July. Others such as Tech Mahindra, NIIT Technologies and Cigniti also said would continue hiring that have centres in the US, Europe and Africa.

Cheaper workforce
While issues around visa for offsite employees are still a problem, the real driver for local hiring is access to cheaper workforce. Also, servicing clients on their time zone is assuming importance.
“Our office in the US has 50 per cent local staff. We would continue hiring more in such on-shore or near-shore locations globally. Establishing such facilities is to address the local clients and helps in providing lower cost services to these nations,” Mr Arvind Thakur, Chief Executive Officer, NIIT Technologies, told Business Line.

He said providing services through local people is cheaper and also serves customers at same time zone. The company has 647 employees in the US and 739 in Europe, Middle East, Africa region. NIIT Technologies’ 95 per cent of employees in Continental Europe are locals, Mr Thakur said.

Looking at such benefits, WNS is setting up its first local office in North America and would start operation with atleast 100 people. The company plans to ramp this up to around 800 in next few years. “The ‘new normal’ has brought in a new set of challenges that is changing the market dynamics in unprecedented ways,” Mr Naveen Narayanan – Head Talent Acquisition, HCL Technologies, said. He said the economic slowdown across the world, especially in developed economies such as US and Europe, is putting pressure on social and community systems.
Job loss numbers keep increasing creating serious unemployment challenge and, therefore, HCL Technologies is pulling its resources to increase job creation in local communities of operations, he said.

Infosys, which has 6.46 per cent of its total workforce of international origin, said it intends to take it to 15 per cent. “At any point 30 per cent of the total workforce will be onsite,” an Infosys spokesperson said. Infosys’ Chief Executive Officer, Mr S.D. Shibulal, during the fourth quarter results had said that the company plans to hire 1,200 employees in the US. Similarly, Wipro Technologies has 675 employees in its Atlanta development centre and 80 per cent of them are locals.

Small firms

It is not just big firms that have set their eyes on the local talent. Small firms too are taking this route to avoid pressures in getting H1 visas and spending premium on such employees. Cigniti, an IT solutions firm that has recently turned its focus only on testing tools, is planning to 50 testing experts in the US this year. It would focus on optimising and rationalising testing tools practice on the client locations.

The company with about 500 employees has already recruited 200 for its US operations. “Majority of them would be locals as hiring them would be easier,” Mr Sriram Rajaram, President, Cigniti, said. Other than the US and Europe, companies are hiring locals. Tech Mahindra’s BPO (which is called Business Services Group) has hired 1,100 in the Philippines for its centre there.

“We have set up the centre for a non-BT telecom player there last year. Over 99 per cent of the people we hired there are locals,” Mr Rajeev Narang, Vice-President (Human Resources) of Tech Mahindra, said. In Africa, Tech Mahindra has about 2,000 employees in seven countries to serve Airtel. Majority of them too are hired from the local pool. Similarly, Mahindra Satyam, which opened aerospace and defence delivery centre at Toulouse in France, said it would hire 80 people locally for the centre in the areas of engineering, IT and communication domains, Mr C.P. Gurnani, Chief Executive Officer of Mahindra Satyam said.

Indian financial services sector's IT spend to grow 17% this year: Gartner

Indian financial services industry will spend Rs 37,700 crore on information technology products and services in 2012, an increase of 17.4 per cent over 2011 at Rs 32,100 crore. According to independent research firm Gartner, the forecast includes spending by insurers on internal IT (including personnel), hardware, software, external IT services and telecommunications.

Telecommunications equipment and services represents the biggest spending category, and it is forecast to reach Rs 13,100 crore in 2012, up from Rs 11,300 crore in 2011, it said. However, spending on software is expected to grow the fastest in 2012 to Rs 3,400 crore in 2012, up 28 per cent of about Rs 2,700 crore in 2011.

This is being driven by high growth in enterprise software applications such as financial and administration packages and customer relationship management, Gartner said.

“Mobile is really on top of the mind for Chief Information Officers currently, and enterprise spend on devices is expected to grow by nearly 50 per cent in 2012. There is also a corresponding growth in mobile network services, of nearly 30 per cent,” Ms Derry Finkeldey, principal research analyst at Gartner said. She said this focus on mobility was a global trend, but particularly pertinent to Indian financial services industry.

Govt to promote IT SEZ in smaller towns

The government is likely to announce incentives to promote IT-related export hubs in small towns as part of its effort to woo back investors to special economic zones. The commerce ministry is amending the rules for special economic zones (SEZs), which have become unattractive to investors following imposition of minimum alternative tax (MAT) and dividend distribution tax (DDT) in 2010-11. Earlier, SEZs were exempted from most levies.

While SEZs across sectors will benefit from the new rules, IT SEZs stand to gain the most as their contribution to exports is more than that of others, an official said.

"As IT accounts for more than a fourth of the exports from SEZs, the reforms will have a special dispensation for the sector," the official said, adding, "It would streamline incentives in a way that it encourages such zones to come up in tier-II and tier-III cities." After imposition of MAT and DDT, growth in exports from SEZs slowed to 15.4% in 2011-12, from 43.1% in 2010-11 and 121% in 2009-10. The proposals being considered include a sharp reduction in the mandatory minimum area requirement for different categories of SEZs, easier norms for building social infrastructure like schools, shopping complexes and residential blocks in SEZs in smaller cities, besides relaxation in vacancy and contiguity or continuity norms that have often proved to be hurdles for proposed zones.

The government may also allow broadbanding of sectors, which will allow ancillary units to come up in sector-specific SEZs. To factor in more certainty for investors, the government is also planning to issue clarifications in advance on investment and regulatory issues.

"Investors got a jolt when the finance ministry decided to impose minimum alternate tax and dividend distribution tax on SEZs in 2011, as the investment decisions had been taken keeping the initial tax-free status in mind," the official said. The incentives, however, will mostly be aimed at simplifying rules for setting up SEZs and not have any direct revenue implications. "The revenue department has made it clear that it does not want to take on additional financial burden. We respect that and are ready to stay within the mandate specified by the SEZ Act," the official said.

Interestingly, the revenue department had given a list of objections to the proposed changes, many of which the commerce department has chosen to ignore. However, experts say the SEZ Act gives the commerce department enough powers to make significant changes in rules.

"The SEZ Act allows the government to make amendments, either for all or a particular class of zones, and it can come out with notifications on provisions that it finds appropriate," said Hitender Mehta, co-chairman of industry body Assocham's SEZ council. Plans are afoot to simplify contiguity or continuity norms, which often require developers to build infrastructure to by-pass public structures.

"IT SEZs need not have the same nature of physical fencing as required for a manufacturing SEZ. Even for manufacturing SEZs, contiguity issues can be examined on a case-to-case basis," the official said. Several developers in the country have already written to the government for relaxation in these rules.