 "Trump may force Indian IT to hire more US employees")
This would put additional burden on Indian firms such as Infosys, Wipro and Tata Consultancy Services, who are already facing their worst growth dip in a decade. While these business are getting newer projects in areas such as cloud and digital technologies from clients in the US, the growth is not offsetting the rapid decline in traditional services that contributes four out of five dollars to their revenue.
Infosys and Cognizant have cut their annual revenue forecast, while Wipro expects flat revenue growth in the quarter to December. This also has prompted India's software lobby Nasscom to say that it would revise downwards the 10-12 per cent growth it had projected in April. US contributes to over 60 per cent of India's $108 billion software exports.
"Any Trump inspired reform of the US immigration laws will likely make it harder for the IT industry to move its employees into the US market. This will likely take the form of fewer H1Bs, higher cost for visas, and caps on the number of visas the firms can utilize," says Peter Bendor-Samuel, Founder and chief executive of Everest Group, a global outsourcing advisory.
"The likely response would be to hire more US based resources. Taken together these changes would raise the cost to operate for the industry and reduce the Indian firms cost advantages," he added.
Trump, during his election campaign had threatened to impose 35 per cent tax on IBM, which had outsourced work to India, while accusing his rival Hillary Clinton of favouring Indian software firms such as HCL and TCS to move jobs offshore. His anti-immigration rhetoric would also mean that the US would now restrict issuing of H1B visas to 65,000 visas and would not expand, despite calls from the US technology industry to allow more foreign workers into America.
Nasscom says that India's IT industry contributes to over $2 billion in annual taxes in the US, with a cumulative of $20 billion over 10 years, while generating 4,11,000 jobs in the US as in 2015. The industry says that US companies benefit from outsourcing as they can allocate resources to critical work locally.
Last year, Infosys had 8,312 employees in the US who were hired locally. Another IT major HCL Technologies has approximately 10,000 employees in the US, including the H1B visa holders. Wipro has more than 31,000 employees outside India and out of them 42 per cent are locally hired. Companies like TCS, Wipro and Tech Mahindra do not disclose region specific employee numbers.
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Analysts say that Indian firms have to hire locals as they embrace newer business areas such as digital, where they need professionals to consult and implement at locations near to the customer.
"Given the trade relationship between India and US, especially on the IT services business, it may be difficult for the US to take decisions against the industry. The new administration in the US will encourage creation of more jobs for the local people. But, with or without Trump, the transformation in IT services would prompt Indian IT companies to be present close to the customers," said Dinesh Goel of research firm ISG.
Firms such as Infosys and Wipro have already highlighted that they are trying to offset dip in business for traditional services through the use of automation, artificial intelligence and improve efficiency. This and the growth in digital business is still not able to offset the rapid decline seen for application development and maintenance and IT infrastructure management due to the shifts in technology trends such as cloud adoption.
"Indian IT sector must now brace for further troubled times ahead. The sector was already battling both cyclical challenges (due to changes and shifts in financial services, healthcare verticals) as well as secular challenges (i.e., cloud shift, automation, pricing pressure, insourcing) impacting revenue growth. A sub 10% growth for FY17 is certain," Arup Roy, Research Director, Gartner said in a statement on November 9.