A report from the workers’ union The Washington Alliance of Technology Workers has highlighted the limited business that India’s IT services community has won with US state government agencies.
A storm of controversy has grown around the use of low-cost offshore delivery in IT projects, particularly in the public sector, with protectionist groups talking up the potential threat to domestic IT job positions. But despite having huge budget deficits, state agencies are not spending as much on low-cost offshore IT resources as private sector companies such as banks and technology firms.
The Alliance’s report claimed that 18 offshore outsourcing vendors are aggressively seeking state government contract work through the recruitment of former government officials and by making state electoral contributions. The 18 vendors have already secured a combined $75m in contracts with at least 30 state government agencies so far, according to the report.
But to put this into $75m figure into perspective, president Bush has stated that US state and local government agencies will spend a total of $80bn on technology, meaning that less than 0.1% of this figure is going to the bank balances of the likes of Indian vendors Tata Consultancy Services and Infosys Technologies.
The Alliance acknowledges that it is difficult to get details of the value of other state work being performed by offshore vendors, but even if this $75m total is multiplied by ten, it also represents a tiny fraction of the amount that state governments spend with domestic IT outsourcing providers such as EDS Corp, Computer Sciences Corp and IBM Global Services.
The Commonwealth of Pennsylvania, for example, is spending $252m on a contract extension with Unisys to run its mainframe center, $100m with EDS Corp to run its health insurance processing system, and $47m with AT&T to run its toll-free citizen communications services.
It is worth noting that the marketing strategies of India’s largest companies are no less aggressive than those of the major Western services providers. Technology companies donated $26m to the two main US political parties during the 2002 election cycle, according to the Center for Responsive Politics, with ACS Inc, EDS Corp and Unisys Corp heading the list of contributors from the IT services sector.
These companies also recruit high-profile executives with strong industry contacts to help their contracts bids in the public sector. San Diego, California-based outsourcing company Science Applications International Corp recruited the former head of US Customs in April to spearhead its strategy for selling to Homelands Security agencies, and in the same month, EDS elected Richard Fisher, the former deputy US trade representative, to its board of directors.