Only Localisation Can Counter Adverse Impact Of U.S. Visa Changes, Say Wipro And Tech Mahindra
More localisation will drive up wage costs and drag margins, CEOs of the two IT firms say.
The headwinds facing India's information technology industry are likely to blow stronger in 2017, say the chief executive officers of two leading Indian I.T. companies, Wipro Ltd. and Tech Mahindra Ltd. Speaking at the World Economic Forum’s 47th annual meeting in the Swiss ski resort of Davos, both admitted that while visa issues have often plagued the industry, any adverse changes in the U.S. can only be mitigated by more localisation. Currently about 30-40 percent of the work done by Indian I.T. companies in the U.S. – their biggest market – is through local recruits. More localisation will impact margins as wage costs rise.
Among other challenges, Wipro's CEO Abidali Neemuchwala spoke of focusing on acquisitions to stay ahead of the technology curve. Espousing Azim Premji's famous ‘string of pearls’ theory he said Wipro is big on buying skills and specialisation but not keen on buying big.
Tech Mahindra’s chief executive officer and NASSCOM chairman CP Gurnani expects 2017 to be a tougher year for Indian I.T. companies. He too emphasised on localisation in the face of growing protectionism and indicated that wage costs could rise 20-30 percent. The other risk of currency volatility – a stronger dollar, weaker pound – will also add to costs due to hedging. Together, the two will put pressure on margins in the coming months.
Gurnani also red flagged the issue of cyber security – expressing hope that the government will focus more on putting skills and money to strengthen cyber security. Speaking of his budget expectations Gurnani highlighted the need for simplicity in taxation, pointing to the multiple registration system under the Goods and Services Tax (GST) as a drawback.