First, the COVID-19 pandemic has caused revenue uncertainty across industries, potentially eroding the viability of development centres if demand weakens drastically in the US.
On the other hand, the protectionist mood in the US in an election year could make development centres even more important. On 22 June, US President Donald Trump instituted restrictions on nonimmigrant visas, barring the entry of additional workers through H-1B, H-2B, J, and L nonimmigrant visa programs until the end of 2020. Without access to engineering talent from foreign countries, notably India, US corporations are more reliant than ever on development centres to innovate profitably.
As a result, India’s development centres find themselves perched in Offshoring 3.X. While this has the potential to turn into a fourth wave in India, a lot depends on what transpires in the US through the remainder of 2020.
Looking east
According to the US Bureau of Labor Statistics, occupations requiring computer and mathematical skills in the US saw an unemployment rate of 4.3% in June 2020, up from 1.5% a year before. But the US Chamber of Commerce and Indian IT’s trade body Nasscom are swift to point out that these positions were lying vacant due to the unavailability of such skills locally. “This is about high-skilled worker mobility,” Shivendra Singh, vice-president of global trade development at Nasscom, tells The Ken. “It is not an immigration issue, but about scarce and highly-valued resources which are globally mobile—the technology talent.”
In May, there were around 625,000 active jobs in occupations requiring computer and mathematical skills in the US, according to Singh. “If there is such a high degree of unemployment, why would these jobs remain vacant? It is an inability to fulfil the skills that these jobs require, which is where the H-1B visas come in,” he says.
A natural question that follows from this is: What is the effect of this move?
Since 2017, Indian companies in the US have hedged for contingencies arising from protectionism by hiring locals. Infosys, for instance, reported 13,000 American employees in its results for the quarter ended June 2020. Likewise, American corporations ramped up their offshore development centres with continuous investments in India.
Walmart, which generated $514 billion in revenue in 2019, tried to attract tech talent in Silicon Valley as early as 2011. But it was met with limited success; techies didn’t want to join Walmart when they could join ‘cooler’ companies like ride-hailing startup Uber and payments platform Stripe. Meanwhile, Walmart Labs—incorporated in Bengaluru in 2008—grew to 1,400 associates by 2017.
Till now, though, Walmart has depended on IT service providers like Cognizant Technology Solutions, Wipro, and Tata Consultancy Services to build applications for them in the US and from India. With the visa regulations tightening, growing the India arm meant Walmart could access its in-house talent. Talent that, since 2010, has had rich exposure to developing e-commerce and mobile payment technologies due to the rise of companies like Flipkart, Myntra, and Paytm*.
Walmart’s new executive vice-president and global chief technology officer, Suresh Kumar—who joined in July 2019—has turned the corporate’s attention to India with ‘Project Indigo’, which he began six months ago. While the inside joke is that Project Indigo stands for “Go to India”, it is a part of Kumar’s vision to integrate Walmart’s technology chops across its global locations.