Ohio Governor Ted Strickland is quick to admit that he doesn’t “particularly enjoy heights”. So why would he climb into a cherry picker to be lifted 40 feet in the air?
To show off a 196,000-square-foot office park in the Cincinnati suburb of Milford to executives from Tata Consultancy Services (TCS), India’s biggest tech company and a thriving part of the Tata Group conglomerate.
To sweeten the deal, Strickland threw in $19 million in tax credits and invited the TCS crew to a state dinner at the governor’s mansion. “The economy is difficult,” Strickland says in the January 11 issue of Bloomberg BusinessWeek. “I will go wherever I can to find jobs.”
TCS said yes, and in November Strickland showed up at the sprawling wooded campus for a ceremony to mark the hiring of the 300th employee at what has become the cornerstone for TCS’s North American efforts.
Tata has hired some 250 graduates of Ohio State University, the University of Cincinnati, and other nearby schools. Soon the facility may employ as many as 1,000 Americans doing back-office and technology outsourcing for US health-care companies and local governments.
Atlanta, Dallas
With the economy growing again but unemployment stuck at double-digit levels, states and municipalities across the US are scrambling to woo anyone with hiring plans — even if that means going hat in hand to the same bunch that have been responsible for hundreds of thousands of jobs going overseas.
Dallas, Atlanta, Minneapolis, and Tallahassee have all been actively courting Indian tech outfits. Wipro Technologies in March inaugurated a centre in Atlanta, which now has 350 employees — nearly 300 of them Americans, including senior managers recruited from US tech rivals.
Infosys Technologies, meanwhile, is planning an operation in Dallas, to target some of the $52 billion the US government will spend on outsourcing work just in 2010.
For the Indians, American facilities can mean more work on government and health-care projects — areas where laws prevent the transfer of data overseas. An on-the-ground strategy gives them access to local workers who can better understand cultural nuances. And it lets them better compete against American rivals such as IBM and Accenture, which tend to win lucrative consulting contracts that hinge on solving complicated business problems on site, rather than simply writing computer code for cheap wages in India.
Public relations?
“We need to become more efficient, more sophisticated,” says Sambuddha Deb, a Wipro vice-president who makes sure Wipro’s India-based and foreign employees work seamlessly together. “It’s not just about setting up software factories” in India.
Some critics say that the new centres are little more than political cover and that they do little to boost employment in the US.
“One reason they are doing this is for public relations,” says Ron Hira, an expert on offshoring at Rochester Institute of Technology. “They want to send the message, ‘We’re creating jobs for Americans.’”
It’s true that the jobs the Indians have created in the US are a rounding error compared with their overall workforce. Even as it hired a few hundred American employees in 2009, TCS took on tens of thousands of newbies in India. And TCS has more than 11,000 Indians working in the US on temporary visas, while Wipro has 7,000.
US recession
That could change if a Senate bill introduced in April makes it through Congress. The measure would bar companies with more than 50 US-based employees from using temporary visas for more than half their US workforce, effectively forcing Indian IT companies to hire more Americans.
A further concern for Indian companies is that hiring Americans is far more expensive than shipping work off to India. TCS staffers in Milford, for instance, earn more than $50,000 per year, vs the $7,000-$8,000 that Indians doing similar work make in Bangalore.
“Offshore outsourcers’ wonderful profitability has largely been on the back of labor arbitrage,” says Peter Bendor- Samuel, CEO of Everest Group, a Dallas consulting firm that advises companies on outsourcing strategies. “Those profits surely would take a hit if the Indian companies start hiring more Americans.”
Work in India
TCS already had to delay opening the Ohio centre for almost six months during the recession in the US. And Wipro says its Atlanta operation isn’t yet profitable. Both say American facilities are unlikely to create huge numbers of new jobs in the US soon. For several years, at least, the vast majority of work will continue to be done in India and other low-cost countries, according to Surya Kant, North America president for TCS.
“But many (clients) want work to be done in the same time zone, and we want to be closer to our customers,” Kant says. “Increasingly, we will move that work to centres like Cincinnati.”
For Strickland and other officials in places where jobs have disappeared as car makers go bust and steel production moves overseas, the new jobs — and the taxes they generate —are rare good news.
“I certainly don’t see it as consorting with the enemy,” says Strickland, who ended up sharing a table with Tata Group Chairman Ratan Tata and India’s Commerce Minister Anand Sharma at the November 25 White House State Dinner for Indian Prime Minister Manmohan Singh. “These are good, solid jobs,” adds the governor. “Jobs that we feel will be long-term, and that we hope will increase in numbers.”
