Pres. Obama’s Healthcare, Credit Card Reforms May Mean More Work for Indian IT

Following a tough recovery period in the initial phase of an economic recession, Indian IT outsourcers are hoping to see a turnaround in their business halfway into next year. The expectation comes on the heels of a move by financial firms in the west to offshore their technology work in order to recuperate from the credit crunch.

There has been some consolidation among banks in developed countries. Currently, banking firms are looking to execute brand new IT platforms to manage their recent takeovers. Simultaneously, modifications in the U.S. legislature are projected to drive cost reductions in the credit card sector. This is also likely to happen in the health industry as well. All of this amounts to an advantage for outsourcers.

President of consulting at HCL Technologies, Steve Cardell said in an online report by Financial Times, banks are 're-platforming' now. Incidentally, HCL acquired U.K.-based Axon for $700 million in 2008 in what was touted to be the Indian outsourcing sector's largest overseas acquisition. He added, due to so many takeovers that occurred during the credit crisis, there has been a lot of implementation involving integration of mergers in the financial services sector.

In the initial phase of the global economic downturn, Indian outsourcing firms were badly hit because banks had stalled outsourcing involving software implementation and business processes such as mortgage applications. During this time, industry giants like Wipro, Tata Consultancy Services, and Infosys Technologies downsized their workforce. In comparison, the pre-recession workforce growth rates tagged at about 30% per year.

Nonetheless, Indian IT firms are speculating that the recent cost-cuts stemming from the recession tend to gradually shift toward a 'crisis dividend' for the sector. This translates to elevated levels of outsourcing to countries where costs are significantly lower, i.e. India.

With President Obama's clean-up of credit card practices and healthcare reforms in the offing, analysts say that this could mean more work for Indian outsourcers as well. These rules in the U.S. are expected to be modified in 2010. It would mean there would be a limit on fees and interest rates for credit cards. This points to more offshoring work. Moreover, another probable windfall for Indian BPO groups involves healthcare. Should the President's proposal pass, it would put pressure on hospitals to include more people under insurance plans and slash costs.

However, analysts forewarn that the gradual flow of work to outsourcers overseas would take several quarters and it would take some time before any benefit to Indian IT firms are observed.