Trump Effect: IBM's US Hirings Not Such a Blow for India

There will be some impact with the MNC's shift to emerging technologies but India's cost advantage remains

IBM’s decision to generate 25,000 new jobs in the US might not have an immediate impact on its outsourcing arm in India. However, the company’s focus in emerging areas such as cloud and digital with clients closer home could potentially reduce expansion of its offshore teams here.

Amid President-elect Donald Trump’s promises to bring back jobs to America, IBM chief executive Ginni Rometty’s plan on local hiring and investment of $1 billion was the first significant announcement by a large information technology (IT) entity. Sector experts say new hires in the US are likely to be for areas in the digital segment, where the business model requires work with clients at their location.

“I do not believe the 25,000 people IBM intends to add in the US will directly affect the number already in India. For example, I would expect a significant number of the 25,000 to be at client sites. However, I do expect this shift in emphasis will affect the prospect for adding additional headcount in India, as IBM shifts its focus from a legacy services firm to a cognitive and cloud firm,” said Peter Bendor-Samuel, chief executive of Everest Group, a global IT researcher. 

IT services providers say there has been a decline in traditional services and the pace of growth in digital technologies -- where clients want software applications to work seamlessly with a better user interface on devices like smartphones — is not offsetting the fall in traditional IT services such as building of applications and maintaining these on remote servers. 

Given the strong focus on emerging technologies like cloud and artificial intelligence, there are possibilities of IBM divesting from parts of its legacy IT infrastructure services at some point, says Bendor-Samuel. In this context, he recalls their decision to sell off the low-value call centre business in 2013.  

IBM did not respond to queries sent by Business Standard. That apart, IBM still looks at emerging markets as a growth opportunity. “IBM seems very committed to emerging markets. In fact, when we study the growth rates for IBM, these markets have the most potential and we see IBM the most aggressive there in building business,” said Ray Wang, principal analyst and founder of Constellation Research. 

In fact, experts say, India will remain a strong talent hub for companies like IBM, as there is no alternative in the near future. This country also gets an edge over the US from the cost efficiency it offers. “This (IBM’s decision to hire 25,000 people in the US) might not have a massive impact on hiring in India, as there still remains a relatively good cost arbitrage,” said Wang. 

An aggressive hiring plan in the US could also give IBM an upper hand for IT contract re-bids from US companies, slated to happen over the next couple of years. Some analysts have already hinted at a structural change in renewal and fresh IT deals wherein businesses might look at outsourcing locally and offshoring as a final option. “Hiring in the US will position IBM well as many US federal contracts come up for renewal,” said Wang.

Reference - http://www.business-standard.com/article/companies/ibm-s-us-hirings-not-such-a-blow-for-india-116121900789_1.html