Indian IT: US Job Drain or Generator?

Offshore outsourcing has long served as a whipping boy for politicians, pundits and most anybody else looking for a convenient source of blame for America’s rocky employment situation. As recently as December 2011, a bipartisan bill, the US Call Center and Consumer Protection Act (HR 3596), that would make US companies moving call center jobs overseas ineligible for federal grants and loans, was introduced  to Congress (it is currently under review).

However, despite protests from the highest levels about the negative impact offshoring has on the American job market, at least in one specific case, offshoring may actually have a significant positive impact. According to a just released study from the National Association of Software and Service Companies (NASSCOM), an Indian government body that helps regulate that country’s outsourcing industry, Indian-based technology companies actually contribute substantial tax revenues, financial investments and jobs to the US economy. Indian flag

Since offshoring is most frequently blamed for costing US residents their jobs, let’s start there. The study indicates Indian tech firms directly employ 107,000 people in the US and directly and indirectly support a total of 280,000 right here in the good ol’ US of A. In addition, from 2006 to 2011, Indian tech firms in the US paid a total of $15.3 billion in federal taxes between 2006 and 2011, including $3.6 billion in 2011 alone. In addition, Indian foreign direct investment in the US increased 90% between 2009 and 2010, and trade between the US and India has increased by a factor of eight in the past two decades.

So why have Indian IT companies been so anxious to invest in US talent and resources in recent years? Beyond the fact that despite all gloom and doom you hear about our country’s decline, the US still offers the world’s best educated and most innovative workforce, as well as a level of political and economic stability unmatched anywhere else in the world, Indian tech companies want to do business here because it is where their customers are.

As US companies continue to offshore work to Indian IT providers, it makes more and more sense for those providers to operate delivery centers and employ personnel here in the US. In addition to cutting down on operational and travel costs, creating jobs here also allows Indian tech companies to reduce visa difficulties, ease language and cultural difficulties, and also generate some goodwill among their US clients. It's no wonder that the US is perenially ranked #1 on the Business Software Alliance's annual IT Competitiveness Index.

The trend really illustrates the increasingly globalized nature of business. The whole concept of selecting a “shore” is becoming somewhat nebulous, as many “offshore” providers are setting up operations in the US as well as in “nearshore” locations in Latin America. Commerce does not care about borders, only about efficiency, and that bodes well both for the US economy and business community. The more efficient US business becomes, the better our economy will perform. And the better our economy performs, the more foreign as well as domestic companies will seek to create new jobs and make new investments here.