Time to sell India-based units?

Not too long ago, it was all the rage to either send IT work offshore or to operate your own offshore IT unit. The economics were compelling. But now that companies, especially financial services companies, are looking to cut costs at every turn, more are selling their offshore units. The Wall Street Journal reports that about 500 western companies have a presence in India. 

Citigroup and AXA SA among others have done this, taking the opportunity to lock their sold-off units into long-term contracts. Hewlett Packard, reportedly, is in talks with Fidelity to buy its India-based IT operations for about $150 million. 

People have suggested, for some time, that making an India-based IT shop work economically and managerially was getting harder every year. Turnover was high, salaries were heading north and some have looked to even lower cost regions around the globe. In general, it seems that most U.S. companies never quite mastered the art of India-based off-shoring. Some have even brought their operations home. 

One twist in all this is that some Indian-owned outsourcing-type firms are bent on expansion in the United States. The best example may be Wipro, India's third-largest IT outsourcing company and one of the better known in the United States. It is increasing its headcount here, mainly in the banking and financial services consulting space, according to the Business Standard. Risk management and compliance services seem to be the big drivers right now. Around half of its consultant base already work in the United States and Europe. 

Other Indian firms, such as Infosys and HCL, also expect a bump in business. So that raises the issue: Does it make more sense to outsource to a U.S. firm operating overseas or an overseas firm operating in the United States?

The other wild card, as all this shakes out is the politics of it all. Indian firms are up in arms about the Congressional proposal that would prevent companies with more than 50 percent of H-1B or L-1 visas from receiving additional visas. There is a lot of gnashing of teeth going on and the term trade war is being used. It's not at all inconceivable that India would retaliate in ways that affect not only U.S. shops in India but also U.S. clients of Indian IT shops. - Jim