India's IT-BPO industry warily cheers Obama's victory, fears cut down in outsourcing

US President-elect Obama is a staunch supporter of the growing India-US strategic partnership but has strong views about outsourcing of US jobs overseas, especially at a time when the US economy is reeling from a financial crisis and companies are handing out pink slips or cutting wages by the thousands to curtail costs and deal with the economic slowdown.

Obama feels that it is "only natural" that the world's oldest and largest constitutional democracies should enjoy "strong relations" but has put his foot down when it comes to outsourcing.

"When I am President I will give tax credits to companies that hire in the United States and end tax breaks for companies that ship US jobs overseas," he had said during an election rally in Cleveland, Ohio, hinting that outsourcing is the cause behind the slump in the US economy.

Obama's viewpoint has triggered concerns among Indian IT-BPO firms that are already witnessing decline in outsourcing business from the US as clients there are either delaying or cutting down on IT spending.

In a report based on a global survey, investment bank Goldman Sachs has also warned that IT budgets of US companies could decline by 5 percent in 2009 compared with 2008 with concerns growing that the US economy is on the threshold of a recession, probably the worst financial crisis since the 1930s.

Indian IT firms depend on the US clients, especially those in the banking, financial services and insurance (BFSI) sector, for major portion of their revenues, but the Goldman Sachs survey has revealed that chief information officers (CIOs) of companies in this sector are preparing for a cut of 10-20 percent or in some cases, even higher, in their IT spending budget.

"Our conversations with CIOs across many verticals, as well as with management teams in our coverage, have emphasized the broad-based nature of the current downturn, both by vertical and geography," the report noted.

However, this "cost-constrained IT budget scenario" is not restricted to the US alone. The survey also forecasts negative growth in IT spending in other key developed markets like Western Europe and Japan in 2009. The telecom segment, which was not affected significantly in the current year, is forecast to show a 7 percent decline in capital spending. Manufacturing is expected to show flat growth to 10 percent lower growth, while government spends are also expected to soften quite a bit.

More scary is an IMF report which warns that advanced economies would slip into recession next year, while the growth rate of Asian nations would come down.