US businesses will show increased appetite to migrate to the Cloud and adopt technologies such as artificial intelligence (AI) and Internet of things (IoT) in the next few years, leading to increased offshore and onshore outsourcing opportunities for IT services providers.
“The latest direction from the US administration adds to the growing backlog of digital transformation projects in the marketplace. This bodes well for the Indian IT industry and will further accelerate an already hot market for them,” said Peter Bendor-Samuel, chief executive officer of Everest Group, a US-based IT advisory and research firm.
“We believe that the market is at the start of a five-year mega cycle as digital transformation and modernization move into its scaling phase,” Bendor-Samuel added.
The Biden administration’s plan unveiled last Friday to spur growth in the US economy by curbing corporate abuse includes 72 specific initiatives that make it easier for customers to switch banks and take their transaction data with them.
Indian IT firms earn over a third of their revenue from banking and finance customers globally.
The plan also includes mandating an end to excessive contract termination fees charged by internet service providers, allowing the sale of hearing aids over the counter, removing non-compete clauses signed by millions of workers in the country and getting airlines to refund fees to fliers over baggage delays and WiFi issues.
Large Indian IT services firms such as Tata Consultancy Services (
), and HCL have already indicated that they would post double-digit growth this year, driven by the increased adoption of cloud and other technologies by enterprises in the backdrop of the receding Covid-19 pandemic in markets such as North America, UK and Europe.
“US businesses are becoming increasingly reliant on the Indian IT majors in this emerging economy,” said Phil Fersht, CEO of IT advisory HFS Research.
Talent and India
There were over 1 million unique active job vacancy postings in computer occupations in the United States as of March 7, 2021, up 11% from 12 months earlier, an analysis by the National Foundation for American Policy (NFAP) showed based on data from Emsi Job Posting Analytics.
US businesses’ growing need for infrastructure modernisation will further exacerbate shortages of workers with IT, data and AI skills, leading them to turn to IT services providers who have large, trained talent bases in India.
This talent shortage in the United States will also allow IT services players to raise billing rates that can offset anticipated cost increases.
“In pre-pandemic times, many US politicians advocated against offshore resources, but this is no longer an option as the talent shortages in the US are a serious issue. I see a continued growth period for hybrid offshore/onshore outsourcing over the next few years, which will accelerate as we gradually emerge from the pandemic over the next few months,” Fersht said.
The US talent shortage could also lead to a more liberalised visa policy to facilitate the migration of workers with IT skills into the country.
“I believe President Biden will ease visa restrictions in line with the easing of the pandemic, but do not expect to see any legislation put forward until next year,” added Fersht.
The United States is suffering from a talent shortage and the Indian majors, as they increasingly globalise, will become critical partners to the majority of the Global 2000 (companies) over the next couple of years, he pointed out.
TCS, which has
made offers to 40,000 fresh graduates this year, says India’s talent base has made global companies look at the country for their technology people needs.
“There’s nowhere else in the world that you will get such phenomenal talent and the scale that it will get in India,” TCS chief operating officer NG Subramanian said on Friday before the Biden move. “If somebody says that Indian talent is becoming more expensive and salaries are higher than Poland and Eastern Europe because that’s available at lower cost, I will be very surprised because we are into this globally.”
Biden’s reforms specifically target industries such as banking and financial services, healthcare, agriculture, transportation, and big technology, to curb monopolistic behaviour and promote competition that will aid in lowering prices for consumers. These sectors today constitute a large customer base for Indian IT services players.
“The Executive Order touches on the key facets of creating broad-based opportunities for labour, preventing monopolies and enhancing competitiveness,” said Shivendra Singh, Vice President and Head of Global Trade Development at It industry association Nasscom.
“While the Executive Order will need to be implemented by federal agencies that build the rules, anything that drives greater adoption of technology across sectors and increased opportunities for partnership between Indian and US companies will be helpful,” Singh added.
The order “commits the federal government to full and aggressive enforcement of our antitrust laws. No more tolerance for abusive actions by monopolies. No more bad mergers that lead to mass layoffs, higher prices, fewer options for workers and consumers alike,” Biden said.
The executive order also directs the Federal Trade Commission (FTC) to issue rules to address competition concerns from big tech players such as Google’s parent Alphabet Inc, Facebook, Apple and Amazon, and limit “killer acquisitions” where internet platforms acquire potential competitors only to stifle their growth.
