Netscribes/Ganesh Ramamoorthy

Slowdown or not, US firms are set to increase their Indian software outsourcing outlays. They are doing this as part of their overall strategy through their own software development and research and development (R&D) centres in India.

In the past three months, US-based majors like Cisco, IBM, GE and Ford have announced investment plans worth over $1 billion in the next two years for India. This investment is expected to create demand for 10,000-odd additional IT professionals in the country.

The significant aspect about these foreign investments is that all of them would go towards setting up either an R&D centre or an offshore development centre in India.

Cisco's $200-million, two-year Indian investment will enhance its R&D activities, especially in the areas of next generation networking technologies and solutions. A portion of the investment will also go to its joint development centres with Indian companies.

The Cisco global development centre at Bangalore will also double its staff strength from the current 500 over the next two years. The company aims to increase engineering staff strength in the country by 300 per cent over the next three years to meet its own projections of sourcing 10 per cent of global revenues from India.

Ford India is investing about $10 million to set up a software development centre in Madras in a bid to make India a hub for its e-business requirements. A wholly-owned IT subsidiary - Ford Information Technology Services of India - has been formed to develop and implement an e-business strategy and provide customer relationship management solutions.

GE India is stepping up its software outsourcing from India by $120 million to $400 million this year. The investment will go to its software development centres at Hyderabad and Bangalore and to GE Medical Information Systems. It would add to the demand for about 8,000 Indian IT professionals over the next two years.

Internet access provider AOL Time Warner too has announced a $100-million investment over the next five years.

IBM has decided to make India the hub for its Linux initiatives in South Asia. As a result, IBM's Linux Competency Centre in Bangalore - one of four such IBM facilities in Asia - will get funds up to $100 million and give employment to about 200 new IT professionals over the next two years.

There are also other smaller players like chipmaker AMD, which has launched a $10-million initiative for India over the next one year. Singapore-based xchange21, a leading e-solutions provider, is opening an exclusive offshore software development centre in Bangalore at a total cost of about $1 million. The centre will employ about 200 software professionals in the next one year.

Scott R Bayman, GE India president and CEO, sums up the general mood behind this sudden rush by US companies to step up development investments in India despite the US slowdown: "If there is an impact of the slowdown on our businesses, we will speed up software outsourcing from India."

The reason is simple. Having its own software development centre is a lot more profitable for US companies today, as they can directly tap into the large "cost-effective" IT talent pool available in India.

One, it gives better control over pricing, that is, the man-hour rates for software development.

Two, it becomes a lot more easier to manage the diverse IT requirements of a big organisation like GE from a centralised development centre.

Finally, it earns the companies a 100 per cent tax exemption on export revenues. With the Union government allowing 100 per cent foreign direct investment in software development centres, an offshore development centre in India is even more lucrative for foreign companies today.

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