India’s information-technology companies are stepping up hiring in the U.S., where a backlash against sending business offshore is gaining momentum ahead of the presidential election.
The hiring also comes as these outsourcing companies are faced with tougher U.S. visa rules that have made it difficult to relocate Indian employees to client locations in the U.S. to carry out technology projects.
Indian outsourcing firms are boosting their recruitment efforts in the U.S. to hire thousands of Americans for development centers in the Midwest. The WSJ’s Deborah Kan gets the details from reporter Dhanya Thoppil about why this is happening.
Midsize Indian software exporter MindTree Ltd. 532819.BY -1.03% said Monday it aims to hire more Americans to staff four or five software-development centers that it plans to set up in the U.S. over the next five years.
MindTree, which is looking to open the centers in the Midwest, will tie up with local universities to groom students for technology jobs, Chief Executive Krishnakumar Natarajan said.
Hiring more people locally reduces risks at a time when there are signs of increased protectionism in countries like the U.S., which are suffering from slow economic growth and high unemployment, Mr. Natarajan said.
“As markets become global, the ability of companies to be local to the markets that they are accessing is also important,” he added.
In a May 2011 photo, engineering recruits undergo training at the Tata Consultancy Services training center in Trivandrum, India.
The Bangalore-based company, which provides outsourcing services in the manufacturing, banking and financial-services sectors, is following in the footsteps of its larger peers. Tata Consultancy Services Ltd., 532540.BY -1.04% India’s largest software exporter by sales, plans to hire 2,000 U.S. employees in the current fiscal year that began in April, some 400 more than last year. Infosys Ltd., INFY +1.77% another large IT company, last month said it plans to hire 2,000 employees in the U.S. in 2012.
The recruitment drive comes as Indian outsourcing companies, which have long been accused by critics of stealing jobs from the West, are now encountering intensified scrutiny ahead of the U.S. presidential election.
Job creation has emerged as a key issue in the campaign. U.S. President Barack Obama has accused Republican rival Mitt Romney of having shipped American jobs overseas while serving as head of private-equity firm Bain Capital and governor of Massachusetts. Mr. Romney’s camp has dismissed the allegations.
India’s outsourcing companies also have defended themselves, saying they are creating jobs in the U.S. According to India’s main software trade body, the National Association of Software and Services Companies, or Nasscom, the Indian outsourcing industry employs nearly three million people world-wide. In the past five years, the industry has generated 280,000 local jobs in the U.S., says Ameet Nivsarkar, vice president of the association.
Still, India’s outsourcing companies continue to depend largely on cheaper India-based employees. At the end of June, nearly 93% of TCS’s 240,000 employees were based in India, compared with a little over 1% in the U.S.
That has caused anger in some quarters in the U.S., where unemployment is rising.
U.S. Sen. Debbie Stabenow, a Michigan Democrat, in April proposed legislation that would offer tax breaks to get businesses to hire more employees at home. The legislation, dubbed the Bring Jobs Home Act, would help companies cover the cost of moving production back to the U.S. and ban tax deductions for the expenses of moving operations abroad.
“Politicians and concerned citizens alike are shining a spotlight on the unemployment dilemma in the U.S.,” said Stephanie Moore, vice president and principal analyst at Forrester Research Inc. This has resulted in companies considering college graduates in the U.S. for jobs before similarly skilled foreign workers, she added.
Tougher U.S. visa policies for Indian workers planning to relocate to the U.S. are also prompting the outsourcing companies to hire more people locally.
The U.S. in 2010 enacted a law that increased fees for visa applications. The law, which almost doubled visa fees for skilled workers to $4,500 per application, applies to companies with more than 50 employees, when more than half of them are on work visas.
Forrester’s Ms. Moore said its clients—including service providers and global corporations—report that it is increasingly difficult to get visas due to the U.S. government’s increased rigidity in enforcing and interpreting visa laws.
“The question is, if more than 50% of college graduates under the age of 25 are unemployed or underemployed, why would the U.S. government issue work visas for foreign nationals,” Ms. Moore said.
The troubles in the U.S. couldn’t have come at a worse time. Indian outsourcing companies, which have long derived most of their revenue from the U.S. and Europe, are already facing a slowdown as clients cut spending on technology projects due to uncertainty in the global economy.
Last month, India’s top two outsourcing companies—TCS and Infosys—gave contrasting business outlooks for this year. TCS said clients continue to invest in technology, while Infosys cut its annual guidance, citing shrinking IT investment. Both companies experienced slower sales growth in the April-June quarter.