Dr. Sundar ParthasarathyGuest Author

Goodbye, cost arbitrage. Welcome, innovation!

By | Dr. Sundar Parthasarathy | Helping you with insights and actions for success

Trump’s controversial threat of a “border tax” move has forced some US-origin companies (like Carrier and Ford) recently, to shelve their off-shoring plans. 

These developments make it imperative to take the news on proposed H1B restrictions very seriously. See: http://economictimes.indiatimes.com/nri/visa-and-immigration/bill-targeting-h1b-visas-reintroduced-in-us-congress/articleshow/56348677.cms

The US-perception is that “Indian IT” steals American jobs. In my view, the argument that H1B is needed for ensuring their competitiveness (and therefore the passing-on of cost arbitrage benefits offers lower costs for their US clients) may not cut much ice hereafter. I am guessing that paragons of Indian IT sector (I mean the firms) must already be working on plans to create jobs in the US. That way (and perhaps the only way), they can blunt the “job stealers” perception. The challenge for these firms will be to alter their strategies (and better yet, their business models), where they will be able to absorb higher costs [of hiring workers of US-origin and keeping them US-based] and be able to create value (and competitive advantages) that justify such increased costs. Arguably, such a drastic change of course assumes that the US-markets will remain vital for these firms.

My view is that such a strategy will require a medium- to a long-term commitment on the part of these Indian firms. Given the costs vs. returns challenge associated with adding US-based jobs, these firms may well look to hire talent that significantly steps up their innovation bandwidth. They may even be looking to embed themselves more deeply (and be more purpose-driven at it, rather than just creating “listening posts”) in innovation hubs like the Silicon Valley, Boston, Seattle, etc. Of course, one another view that could, therefore, be taken is that such policies of the US Gov. (if and when they come into vogue) can also be seen as part of the “bitter pill” prescription for enhancing the international competitiveness of these Indian firms. 

What do you think? It would be great if we can also hear from folks here who’re working in (or deeply associated with) this sector.

Republished with permission and originally published at Dr. Sundar Parthasarathy’s LinkedIn

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