A U.S. Senate bill that prohibits the subcontracting of federal projects to low-cost countries, including India, is part of a short term protectionist trend that will dissipate as unemployment in the U.S. information technology (IT) industry decreases, according to Narsi Narasimhan, CEO of Paalam Inc., an Atlanta-based international outsourcing firm.
The proposed legislation, which was passed as part of a $328 million spending bill by the Senate last month, seeks to stem the flow of jobs from the U.S. to countries like India where salaries, particularly for IT workers, are much lower. Passed in December by the U.S. House of Representatives, the legislation must now be signed into law by President Bush to take effect.
"In the short run, this legislation is worrying," Dr. Narasimhan told GlobalFax. "However, once unemployment figures come down and the shortage of labor becomes an issue, the U.S. will be entertaining outsourcing to stay competitive and get the job done, particularly since H-1B visas are increasingly difficult to obtain."
Paalam's business will likely not be affected by the legislation, because it made the decision early on not to pursue government contracts, he said.
Dr. Narasimhan added, however, that he has been criticized, as CEO of an outsourcing firm, by members of Atlanta's business community in recent months, who are concerned about U.S. job losses attributed to India's outsourcing industry.
He explained that the U.S. still remains a net exporter of IT and that most American companies outsource jobs to India at a cost savings of 50 percent, which has a positive impact on the U.S. economy.
"If the U.S. economy does not take advantage of the savings, we will become less competitive in the very near future," he said.
Dr. Narasimhan also expressed his concern about an Indian government ruling that seeks to tax a foreign company's worldwide earnings if the firm's outsourcing division in India carries out key revenue-generating activities.
"With half a billion poor people to sustain, the Indian government may find the highly paid employees of IT service providers in India, as well as the companies themselves, an easy target," he said.
But he rued that the tax ruling could have a negative impact on U.S. outsourcing in the region. Already, several U.S. companies have halted expansion of Indian outsourcing divisions until the law is clarified.
For more information, contact Dr. Narasimhan at (770) 451-2299.
