Rethink ‘cheap and capable’ benefit

THE HALTING INTERNATIONAL Relocation of Employment (HIRE)Act, proposed inthe US last month, has set alarm bellsringing across India’s information technology-business process management (IT-BPM) industry.

- SAURAV WADHWA

The Bill, which proposes a 25% excise tax on payments made to foreign service providers forworkconsumed by US customers and bars these payments from tax deduction, is yet to beapproved by the senate.

But pass or fail, the signal is unmistakable: outsourcing is back in the protectionist crosshairs.And this jolt mayjust be the impetus India’s $250-billion IT-BPM industry needs to make its next big leap.

Inthe initial decades, India’s outsourcing success came from its cost arbitrage. The “cheap and capable” advantage powered growth, created jobs, and cemented India’s position as the world’s back office. As the sector matured, the story shifted. Lower costs were not the only driver for clients anymore; they also wanted measurable business impact. Our industry responded by adding layers of domain expertise, outcome-focused models,and digital prowess. Efficiency gains and talent arbitrage became key differentiators. Value creation replaced the cost theme.

Now we stand at the next inflection point—value ownership.

Cost arbitrage bought us advantage; value creation gave us relevance. However, resilience can be assured only if we shift to a full-blown value ownership mode now.We must put real skin in the game, investing to create assets and models that go beyond contracts and shape demand.