TCS Deal: US Move Unlikely To Impact Software Services Sector

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New Delhi: : The cancellation of the TCS America contract by the state of Indiana is likely to have little impact on the Indian software and services industry. According to various estimates, US state governments account for less than 2 per cent of the total $6.5 billion IT software and services work being outsourced to India.

After the New Jersey state cancelled the eFunds contact centre contract, this seems to be the second such case with the total loss due to contract cancellation now amounting to not more than $20 million, an industry expert pointed out.

“It is not a great deal of worry at this point but we are dismayed by this action. We will continue to talk with the Indiana state considering that not a single law has been passed to stop outsourcing,” National Association of Software and Services Companies (Nasscom) president Kiran Karnik told eFE.

An industry insider said that the state of Indiana does not have any software services company and it is natural for the state to go in for outsourcing activities.

Consultancy firm Frost & Sullivan country head Aditya Sapru said, “Only 4 to 5 companies in India are handling work being outsourced by the US government. This kind of behaviour is a reflection of the state of economy that exists in the US. From the business perspective, in order to be more competitive, India as an outsourcing nation provides value addition.”

Nasscom along with Frost & Sullivan peg the US government work being outsourced to India as less than 2 per cent of the total work being outsourced to Indian companies.

Further, the industry experts believe that this is a short term trend and is partly influenced by the election stunts in the US.

“It is not possible to stop listed companies from outsourcing as they have a right to protect their bottom lines. The routing of work will happen in any case, if it does not take place in the short run then it is sure to happen in the long run,” Nasdaq South Asia director Ghanshyam Das said.