After reports that the US government is investigating an outsourcing contract involving utility firm Southern California Edison and India’s largest software exporters, Tata Consultancy Services and Infosys, similar pacts signed now or recently are coming under the scanner, people familiar with the matter said.
The latest contract to be scrutinised is one with Walt Disney, which recently signed a deal with US-based Cognizant Technology Solutions. Other recent deals with companies like Fossil are also being investigated, people familiar with the probes said.
On Sunday, IT industry body Nasscom said an investigation could have long-term ramifications on future contracts between US corporations and Indian IT firms and that it would intensify efforts to resolve the issue. “Undoubtedly (these probes) would have a damaging impact on future business. It is a serious concern,” Nasscom president R Chandrashekhar told ETon Sunday.
“This has the potential of seriously destabilising the way the sector does business…and frankly, we are also dismayed by the way a hostile business environment is being created,” Chandrashekhar said.
Cognizant did not immediately respond to an email seeking comment. Indian IT companies have vehemently denied wrongdoing.
On Sunday, communications and IT minister Ravi Shankar Prasad told PTI the government would intervene in this issue of alleged visa violations if the need arises. He said the government was confident that TCS and InfosysBSE 0.78 % would address the matter.
The US Labor Department plans to investigate whether top outsourcing corporations can use H-1B visa workers to replace fulltime technology workers, according to US media reports last week, citing Senators Dick Durbin and Jeff Sessions.
“A number of US employers, including some large, well-known, publicly traded corporations, have laid off thousands of American workers and replaced them with H-1B visa holders. To add insult to injury, many of the replaced American employees report that they have been forced to train the foreign workers who are taking their jobs,” the senators said.
Southern California Edison laid off about 500 workers, beginning August last year, and replaced them with H-1B visa holders from TCS and Infosys.
India’s $146-billion information technology industry is undergoing the biggest transition in its history amid a rapidly evolving landscape. The sector is struggling to match the explosive growth rates that it enjoyed in the 2000s amid volatile currency fluctuations that hammered profits and margins of all top Indian IT firms in the March quarter.
According to a Computerworld story last week, the Disney ABC Television Group cancelled a plan to farm out about 35 application developer jobs, amid a widespread outcry against outsourcing.
“Disney is also part of the overall investigation —it’s quite worrying for Indian IT firms, since a lot of other contracts that are being signed now are also going to be in the spotlight,” said an analyst with a top US-based research firm.
Experts said the politically charged debate on outsourcing is bound to heat up over the coming months with the US elections on the horizon. Infosys and TCS issued statements on Friday saying they are fully compliant with US immigration and visa laws.
“Infosys is committed to complying with US immigration laws. The US Department of Labor (DOL) regularly selects a percentage of visa and labor condition applications for extra scrutiny in this industry, and we work closely with the DOL to assist them in this activity in the ordinary course of our business. We have received no indication of any broader investigation of Infosys visa practices,” Infosys said. TCS said that the company “maintains rigorous internal controls to ensure we are fully compliant with all regulatory requirements related toUS immigration laws.”