However, a TCS spokesperson, when contacted, strongly denied that 20% of the staff in the US was being moved back to India. “In the current environment, moving work to offshore locations (to India) is the focus for the company and its customers, as this helps optimise costs and increase operational efficiencies for both TCS and its customers,” he said, adding that less than 5% of TCS’ total US staff strength have come back to India in December 31, 2008.
The Tata Group company employs close to 14,000 employees in the US, who service many blue chip clients in the banking and financial services, auto and other manufacturing sectors.
Typically, most of the client requirements, include a combination of what is called ready-to-serve (RTS) work and enhancement work or value-addition. Since the slowdown in the US, most clients have completely stopped the enhancement work and hence require lesser number of people for delivering solutions onsite.
The move to shift personnel reflects the current hard economic reality where IT companies have to look seriously at cost reduction measures. A TCS employee working on a large banking project in the US said that fellow employees had been asked to return from the US, as clients had made certain project management positions redundant. While the number of such people are spread across the hierarchy, the number of people asked to shift is more in case of employees with around four years of work experience.
As the slowdown in the US accelerates, clients of TCS are asking the company to offshore its work. A large automaker and rental agency in the US, which is a TCS client, has decided to offshore its work, as it helps them save cost by more than 50%.
According to TCS, its offshoring locations model takes care of such changing dynamics, along with improving its bottomline. TCS spokesperson said that the company has a business model which is based on delivering services from offshore locations using the Global Network Delivery Model to global customers. “We are constantly working towards increasing the amount of work done from offshore locations in India and elsewhere. Our effort to increase the amount of work done from India has resulted in an offshore shift of 270 basis points in revenues in the past two quarters. The proportion of revenues earned from offshore location has increased from 40.9% (of revenues) at the end of first quarter, compared with 43.6% at the end of third quarter.”
However, offshoring work in India could become more difficult if the new US administration introduces tax rebate plans for companies employing the US citizens to retain work within the US.
Politically, the outsourcing model will be under pressure in the US. Two US senators, Dick Durbin and Chuck Grassley, have recently asked for stricter H1-B visa norms, which would increase costs and make it difficult for Indian IT companies to send employees onsite. On the other hand, the bill will also ask these companies to pay prevailing wages to H1-B workers, making offshore outsourcing more attractive
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