New Delhi: India is deeply committed to the long-term success of hosting offshore operations and as technology work moves here, it is likely to stay and grow, according to European analyst and consulting company Ovum.

The current backlash in the US against outsourcing of IT jobs to the Indian sub-continent detracts from the real reasons behind the success of offshore services, it said.

IT firms across the US are enthusiastically embracing the concept, but there is growing concern among sector workers, particularly that the current trend is simply based on reduced manpower costs, Ovum said in a recent report.

"The argument they see is that their jobs have been moved to backwater economies, where the locals will work for a much lower wage packet. The reality hides much deeper issues,” said Alan Pelz-Sharpe, V- P (North America), Ovum.

"India is deeply committed to the long term success of hosting offshore operations and as technology work moves there, it is likely to stay and grow."

The Indian operations doing the work formerly undertaken by US teams not only do the work more cheaply, but they are often more productive, and work to high standards. The cost and quality benefits of offshore outsourcing have been well proven, with many offshore operations working to more rigorous quality methodologies than is common in US operations, he said.

The report said the question of exactly why offshore-outsourcing gained traction so quickly have to be found in reasons like high wage demands for skills that may no longer merit a premium, productivity issues and commitment.

The flip side of the coin was that outsourcing resulted in loss of intellectual assets to offshore operations; it would have an impact on morale and general productivity, and costs (real and political) to the US economy, Pelz-Sharpe said.

The General Accounting Office (GAO) in Washington has announced plans to investigate the impact of government offshore outsourcing on the economy, it said.

"This could be the first of many investigations and a deeper look at what is driving the offshore move," says Pelz-Sharpe.

Implications would have a wider reach than the tech sector alone as proposals had already been floated to offer tax breaks to companies who keep their staff on US soil, and to penalise those who outsource offshore, he said.

In a recession, with high unemployment rates such a visible and high profile loss of jobs was going to become a major issue for Washington to address. "Yet developing efficient, low-cost offshore delivery models, is one of the ways US companies can remain competitive in the global marketplace. So the job loss issue should be balanced long-term by a competitiveness (and hence GDP) gain upside. That of course is no immediate comfort to a software engineer faced with losing her job."

"Difficult questions which no one likes to acknowledge will have to be faced. Until they are, the future of tech in India is looking rosy," he said.

PTI