[Reader-list] Software czars shaken after US stab

geert lovink geert at desk.nl
Sun Jan 25 20:31:11 IST 2004

Software czars shaken after US stab


New Delhi, Jan. 24: India's software moguls seem shell-shocked by a US
Senate legislation banning subcontracting of government jobs outside the
US - a move that will dam up a lucrative portion of the flow of business
process outsourcing (BPO) contracts to Bangalore, Mumbai and Gurgaon.
"We are dismayed," said Kiran Karnik, president of the National Association
of Software and Services Companies (Nasscom) which last year launched a
public relations exercise to blunt the rising tide of resentment against
India for spiriting away call centre jobs in the US.

This is the first stab at a US federal law to stop the outsourcing of
government contracts to countries like India. Until now, lawmakers in 10 US
states - California, Connecticut, Florida, Indiana, New Jersey, Michigan,
New York, North Carolina, Wisconsin and Washington - have attempted a
similar legislation but with little success.

Scrambling to limit the setback caused by Friday's vote, Karnik said: "We
understand that the bill is limited to the period up to September 2004 and
only covers contracts by two government departments - treasury and
transportation. The business impact of such a move on the Indian IT industry
will be very small as the share of US federal government contracts in the
export of IT software and services from India is less than 2 per cent."
The total IT software and services exports from India was $9.5 billion in

US President George W. Bush, who is seeking re-election later this year, has
been under fire over the loss of 2.6 million jobs during the four years of
his presidency. The shift in call centre jobs has turned into a huge emotive
issue in the run-up to the election.

John Kerry, leading Democrat presidential hopeful after the Iowa primaries,
recently said he would "close every single loophole that gives companies
incentives to move jobs abroad".

Bush has been trying to ensure that his re-election campaign doesn't get
swamped by the vitriol over the issue - and is unlikely to overturn the US
Senate's verdict.

"This bill is yet to become a law, and we hope that wiser counsel will
prevail," Karnik said.

Pavan Duggal, a cyber law counsel, said: "If the US federal bill becomes
law, it is likely to provide a blow to the vibrant growth of the outsourcing
industry in India. A major chunk of the BPO work, which relates to the US
government contract work, will be legally impacted as that comes in the form
of subcontracts from American companies."

The proposed bill is based on the rationale that as the source of US federal
government projects is public money, it cannot be re-directed through
subcontracting or outsourcing.

The bill is pending before Bush for his signature. Once it is signed, this
will have to be implemented by all states.

Raman Roy, chief executive officer of Wipro Spectramind, said: "I don't
think this as an issue and we should not read much into it. We need to
examine if such a legislation for any other product or service was done in
the US and its results."

Kris Gopalakrishnan, chief operating officer of Infosys Technologies, said:
"This bill concerns subcontracting work on government projects. Since the
work Indian companies currently do for the US government is not much, we see
the impact to be minimal.. However, as an industry, we have to watch the

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