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Management Strategies

11:23 AM
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Obama Not Impeding Offshoring, TATA says

The new Administration was expected to stem the move of U.S. work offshore but overseas suppliers "don't see it".

TATA Consultancy Services (TCS), Mumbai, a leading provider of offshoring services, says it is not obstructed by the Obama Administration. Raymond Strecker, global consulting practice head for TATA North America, asked was it harder for TATA to operate under this Administration, told BS&T "I'd say no, I don't see it day to day".

President Obama vowed in his election campaign to curb the offshoring trend and it was expected that it might become harder for U.S. companies to shift work to cheaper labor markets, either by directly employing people abroad or by engaging third-party service providers based outside of the U.S.

About one"third of TCS's clients are banks and other financial services firms, Strecker said, noting that they are becoming more comfortable with offshoring and so are sending more strategic work offshore. "They may have actual IT operations, versus application development," he noted. "Our infrastructure business is growing the fastest". That is, he explained, "inside the glass house, or data center: remote server administration, server repair, network monitoring, and various infrastructure services".

TATA now hopes to sell its products, such as core banking software, directly in the U.S. Asked if the company was taking advantage of Asia's relative strength in the current global upheaval Strecker said, "It was our strategy before the crisis so the crisis didn't create it, but did it create an opportunity? You'll know when we announced our first client here."

TCS, which employees 130,000 people, is truly dwarfed by its parent, the TATA Group, from which it was, Strecker said, "part spun out four or five years ago". The Group accounts for three percent of Indian economic output (GDP) and now owns a host of traditional Western brands, from Britain's Tetley Tea, to Jaguar cars, and The Pierre hotel on New York's Central Park.

Cash-strapped Citi bank last October sold to TCS its Indian offshore unit, Citigroup Global Services Limited (CGSL), for $505 million in cash while agreeing to pay TATA $2.5 billion over the next 9 years to provide offshore services to Citi. CGSL, the business process outsourcing arm of the New York-based bank ($1.94 trillion in assets) provides back-office services in banking, mortgage and securities processing.

Strecker described the transaction as "a great deal for us," noting that CGSL provided TATA with a mix of services and "12,000 experts" in them.

A consultant specializing in offshoring who was interviewed by BS&T said banks so need to cut costs now that new regulation will not stop them moving offshore. Preferring not to be quoted on this point, she said, "They'll find a way around it. If I'm a bank and I give business to Microsoft or IBM and they employ thousands of people offshore, am I going offshore?" She added that some bank clients have prohibited her from discussing the fact they they have operations offshore.

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