India not to be perturbed by New Jersey Bill

BANGALORE: There has been a lot of apprehension during the past few days among the Indian IT services companies on the proposal to ban outsourcing of jobs in the New Jersey state of the US. There’s no cause for worry, say industry experts, as the fact of the matter is not as serious as it is made out to be.

Last week, the state unanimously passed a bill that proposed to ban New Jersey companies from outsourcing contracts to companies outside the US. First of all, the bill refers to "State government business getting offshore/outsourced", keeping all private sector businesses outside its purview. This fact should provide a relief to almost all IT and BPO services companies in India as most of their clienteles in the New Jersey belong to the private sector.

Secondly, Forrester had carried out a research to forecast the jobs that have the potential to go offshore and also evaluated this from various industry verticals perspective. Once again, the study found out that the only vertical where there were influential unions was government. "Other verticals won’t even get impacted by this," it noted.

The bill has only been approved by the state senate and requires to be passed by the state assembly and then signed by the Governor to become a law. Already in the US, the move has attracted a lot of criticism and it is expected that services companies across the US, who would get affected by this, will lobby strongly for its cancellation in the coming days.

The Forrester study observed that past cases of such bans had failed. According to Forrester, this proposed bill does not mean much and will not impact offshore market in reality — other than drive down some of the hype. The chances of other US states following New Jersey also appears to be slim, in the wake of opposition that this incidence has generated.

Nasscom, too, has dismissed the move. Nasscom President Kiran Karnik said that the proposal to ban outsourcing of government contracts is against the principles of World Trade Organization (WTO). "Though the business impact of the Bill, on India, will be limited, since US government business offshored to India is negligible at 2-3%, the spirit of the Bill is negative," the association said.

Nasscom said that the issue needed to be looked at from a macro perspective, with the US economy benefiting in the long term with companies focusing on their core business processes. This in turn will lead to more job creation within the economy.

Karnik added, "We are today moving towards a truly global economy, with countries across the world collaborating with each other to gain maximum economic advantage. With countries such as China and India opening their markets for products from developed countries it is time that the developed countries also give us an equal opportunity given our capabilities to provide world class products and services."

Nasscom will work aggressively along with the Indian government to highlight the India advantage in the US and how outsourcing to India is not just cost effective but also provides improvements in quality and productivity for businesses. Nasscom is also in touch with ITAA, the IT association in the US, US policy makers and influencers to avoid precedence of similar Bills being passed in other US states.