Comment Economy

Indian tech sees red in U.S. policy

U.S. President Donald Trump.

U.S. President Donald Trump.  

Wipro flags Donald Trump as big risk

Its official: Donald Trump is a danger for Indian IT businesses. Outsourcer Wipro has named the U.S. president high up in a list of risk factors in its annual filing with the Securities and Exchange Commission. Wipro’s disclosure the first printed in such strong terms by a big Indian tech group hammers home the specific vulnerability of the outsourcing industry to Western protectionism.

The $21 billion Bengaluru-based company, the third-largest in the sector after Tata Consultancy Services and Infosys, warns that Trump’s support for policies affecting trade agreements and his campaign criticisms of free trade could have an adverse impact on its business.

Fifth risk among 40

The alert is eye-catching for two reasons. First, Trump gets prominent billing, with Wipro placing him fifth on a list of more than 40 risk factors for the company and the SEC encourages its charges to rank concerns in order of significance. Second, the issue is identified separately from Wipro’s concern about changes in global immigration policies that determine the company’s ability to secure visas for Indian staff to move to other countries, where they are typically paid less than local hires.

The Americas account for more than half of Wipro’s revenue in its IT services division, which accounts for the company’s entire operating income. What’s more, around 16% of Wipro’s top line comes from the healthcare and life-sciences segment where business looks less certain amid Trumps move to repeal the Affordable Care Act, better known as Obamacare. U.S. policies really do matter.

Like its peers, however, Wipro can only do so much to limit the potential damage.

The industry now avidly talks about onshoring and localisation. Infosys has announced plans to hire 10,000 Americans over two years. Such initiatives may help a bit, but ultimately they may just push costs up and bring narrower margins.

Severe damage from Trump’s policies has yet to materialise, and outsourcing is continuing. Lowe’s, a U.S. home-improvement retailer, just decided to lay off more staff at home and relocate some IT positions to India, according to news reports.

Meanwhile, Goldman Sachs is building a giant campus for 9,000 people in Bengaluru. Even so, the Indian outsourcers, which forged their success on open borders, now acknowledge that Trump is one of their greatest threats.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own)

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Printable version | Feb 22, 2020 7:47:47 PM |

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