Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Statements by two leaders in opposite hemispheres could help explain an announcement Tuesday that Infosys Ltd., the Indian outsourcing giant, will hire 10,000 American workers over the next two years.

We believe jobs should be offered to American workers first

and

This will be the last year when we can be ahead of the curve in technology ... Two years from now, it will be too late.

The first is from U.S. President Donald Trump, delivered April 18 when he announced plans for stricter scrutiny of H-1B visas. The second was from a tired and haggard Vishal Sikka, the chief executive of Infosys, in an interview with Bloomberg's Saritha Rai published Tuesday.

Reactionary
Shares in Indian IT outsourcing firms have declined over the past month amid U.S. moves to tighten H-1B visa rules
Source: Bloomberg

Infosys employs 200,000 people around the world. Of those, some 25,000 are foreigners (chiefly from India) in the U.S. on H-1Bs, where Infosys pays them, on average, less than the salary of those at 55 other companies that hire workers in the same visa category.

That annoys Trump. And such clearly stated annoyance has made things "complicated" for Sikka, not to mention costly for shareholders. 

Now Sikka's company has joined the growing list of Asian peers -- such as SoftBank Group Corp. and Alibaba Group Holding Ltd. -- pledging to create jobs in the U.S., ostensibly to tap into the world's largest economy, but perhaps more to curry favor with the new administration.

The 10,000 Infosys jobs are part of a plan to open four tech and innovation hubs in the U.S., focused on artificial intelligence and machine learning. The first will be in Indiana.

Infosys is different to SoftBank and Alibaba. Like its IT outsourcing colleagues, the Indian company faces challenges that threaten its very existence. A business model built on helping install and maintain custom software on clients' own systems is giving way to off-the-shelf offerings that run on cloud services.

Social, mobile, analytics and cloud -- smac -- is where the action is, but as fellow Gadfly Andy Mukherjee wrote, Indian IT firms have failed to embrace these developments. U.S. companies, on the other hand, have built empires around them.

Getting into the smac business isn't easy, because doing so requires talent that the Indian companies lack. Additionally, with Alphabet Inc., Amazon.com Inc., Facebook Inc. and Microsoft Corp. hiring the best in the business, the outsourcing firms will have to offer wages they just don't want to pay.

Worker Value
Infosys and TCS not only garner lower sales per staff member, but that also leads to lower gross profit
Source: Bloomberg

If the 10,000 workers Infosys plans to hire are a response to Trump's call for more American jobs, then it will be able to fill the ranks with acceptable candidates at slight premiums to the paltry H-1B salaries it currently pays. And its accountants may as well write it up as a public relations expense.

On the other hand, should Infosys decide to hire the world's best, and pay them accordingly, then it might become more competitive with Western rivals like Accenture Plc and International Business Machines Corp. In which case this will be an investment, not merely an expense.

Infosys needs to make the right choice now. Otherwise, as Sikka says, in two years it will be too late.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net