India: Business Almost as Usual

Indian outsourcers don't expect the Mumbai terror attacks to derail the country's $64 billion tech services industry

Subramaniam Ramadorai, chief executive of Tata Consultancy Services (TCS), the largest tech services outfit in India, took a break on Tuesday to participate in a candlelight service for the victims of Mumbai's terror attacks, but afterward he returned to business-almost-as-usual. Although TCS headquarters in Mumbai was shuttered for three days last week, Ramadorai doesn't expect the terror attacks to put a crimp in the Indian outsourcing business. "Our customers say they stand by us. Nobody has said they want to do less in India," he says.

Still, the terror attacks, coming on the heels of the global economic crisis, raise questions about the future of this country's tech services industry. It's one of the backbones of the Indian economy, employing more than 2 million Indians and bringing in an expected $64 billion in revenues this fiscal year.

Industry watchers agree with Ramadorai that there won't be a rush to the exits by Western corporations. After the one-off terror attacks in the U.S., London, and Madrid, tech services operations stayed put. But they warn that if more attacks follow, the thinking could change. "Further attacks could be much more adverse to the Indian outsourcing industry," says analyst Phil Fresht of market researcher AMR Research .

Diversifying Outside India

Already, in the past couple of years, corporations have been spreading their work around the globe. Not content to rely only on India for offshore tech services, customers have moved work to Latin America, Eastern Europe, and China. Fersht says about 85% of all global IT offshore services are now done in India, up from 60% five years ago. He expects the India number to slip to about 70% over the next five years as companies diversify to Latin America and China.

One of the beneficiaries of the trend is likely to be Softtek, of Mexico, the largest Latin American tech services outfit. It has no operations in India. While Softtek hasn't heard from prospective customers in the wake of the terror attacks, it expects demand to grow for non-Indian services. "We think companies will accelerate what they have already begun—diversifying their global workforce," says Beni Lopez, chief executive of Near Shore Services for Softtek.

TCS is already a leading proponent of operating a global network of service delivery centers. It has more than a dozen of them now, including four, with a total of 1,300 employees, in China. Ramadorai expects customers to diversify geographically over the coming years, but he doesn't think it will hurt the Indian tech industry or economy. "There will be no reduction of work, but there will be more attention to security, and contingency planning will be a part of all contract proposals," he says.

Armed Guards at Work?

One thing is sure: Security will be heightened at Indian tech offices. Already, all of the top-tier companies, from India's own TCS and Wipro (WIT) to IBM (IBM) and Accenture (ACN), have extensive physical security measures, including guards at their doors. But, until now, private security guards have not been permitted by Indian law to carry weapons. Ramadorai expects the country to undertake a complete reexamination of its private security measures and consider allowing guards to be armed at hotels, airports, and, perhaps, tech companies.

For now, Indians are still in shock. TCS is holding moment-of-silence observations in its facilities across the country, and hundreds of thousands are expected to participate in candlelight vigils scheduled for Wednesday night.

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