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Indian tech firms are looking beyond traditional hubs to set up shop in the US

American headhunters also say that cities like Austin and Seattle are becoming technology hubs.

Updated: Dec 06, 2019, 09.57 PM IST
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Peers such as HCL Technologies and Wipro, too, have significantly raised the local mix in their onsite workforce.
Not far from the airport in Austin, Texas, is an old dairy farm that is being repurposed into a technology campus.

Sridhar Vembu-led Zoho Corp, a Software as a Service company based out of Chennai, is building an office complex on 375 acres southeast of the town, in what could be a symbol of expanding Indian technology footprint in the West, particularly in the United States.

As towns go, Austin is an alluring mix. Its throbbing college scene rolls on without a bump into quaint tourism, with the occasional laidback Texan strolling by colourful shopfronts overflowing with quirky gifts.

In a place known to support local businesses — its tagline ‘Keep Austin Weird’ is written on public walls and digital posters – large technology companies are scrambling to set up work bases, and Indian companies are just beginning to spot the advantage of moving in.

“Austin gives the vibe Bay Area did in the 1990s, or maybe the 1980s,” Zoho’s chief evangelist and head of global operations Raju Vegesna said, referring to the buzzy college culture and immigrantfriendly attitude of the local populace. San Francisco’s famous Bay Area, the waterside portion of the city that has thrived through the technology revolution over the last four decades with notable names from Uber to Twitter based there, is a hub that has become inaccessible for fresh talent trying to make it big in the States.

Commute to offices in the technology clusters have turned tiring, forcing companies to think of moving to peripheral areas, not dissimilar to what companies elsewhere in Bengaluru and Chennai are doing. “While we have our office in Bay Area in California, we are trying to move out of it because it has become unaffordable and we picked Austin because it’s affordable and growing and has that momentum with a good university,” Vegesna said. “And, you can buy a house there.”

Zoho should know where to hunt for talent. In 2016, it turned around an old mango pulp factory in southern Tamil Nadu’s Tenkasi district and created an office space that now hosts hundreds of engineers coding away for its suite of products, from finance to e-mail software.

It also created the Zoho University that trains those with school certificates in coding to absorb them as employees. About 15% of its engineers come from this university.

“We want to do Zoho University in Austin. For that to succeed, it needs to have critical mass in that local office, which houses 200 employees. Once we have that, we will open it up,” Vegesna said.

Zoho delivered most of its customer support from India, but moved some of those functions to Austin recently, and there are plans to expand that unit, he said.

CHANGING IT
Talent is indispensable for Zoho, or for that matter, the Bengaluruheadquartered Infosys.

The American story of Indian technology services companies is unravelling in a slightly different way — the changing business model demands that they be “with or close” to the client.

These companies have, for long, hired more in India to service clients abroad, particularly North America (the United States and Canada). That legacy model is currently facing challenges, from increased visa constraints to demand for “digital talent” — which is an umbrella term for a workforce that can push the envelope in artificial intelligence, machine learning, IoT, Cloud, social media analytics, mobility and others.

During the past two-and-a-halfyear, Infosys hired more than 10,000 locally across locations in the United States and also set up six technology and innovation hubs.

In a recent earnings call, Infosys CEO Salil Parekh said the effort was working.

“We continue to make good progress on our localization approach as we strengthen this differentiated model to deliver digital services. During the quarter, we launched the Arizona Digital Center to accelerate the pace of innovation for US Companies,” Parekh said.

Last month, the software services provider opened a training centre at Indianapolis to upskill American talent and said it would repurpose a 55-acre site on the grounds of the old Indianapolis airport.

Peers such as HCL Technologies and Wipro, too, have significantly raised the local mix in their onsite workforce. Teaneck, New Jerseybased Cognizant said earlier it was targeting to hire 25,000 in the US over five years beginning 2018.

HCL Technologies, Wipro and Cognizant did not comment on their hiring plans. And, IT industry leader TCS has said for several years now that it was the “top employer in the US” on account of its workforce planning, talent strategy and so on. “Our localisation efforts in the US as well as other geographies have been an integral part of our long-term planning and talent strategy and helps us in being closer to our customers and agile in responding to their needs,” a TCS spokesperson said.

TCS has said earlier that it targets to engage with two million American students through the STEM programme, a multi-department support programme for students in Science, Technology, Engineering and Mathematics.

“In the last few years, we have created over 20,000 jobs in the US and this FY20 (financial year 2019-20) we will be hiring 1,500 freshers from campuses in US and UK,” the spokesperson added.

All these efforts are due to a clear case of client preference, analysts said. The rhetoric of bringing back American jobs is only partially changing the game for Indian technology firms. The time-tested offshore business model of technology services firms is now under question, said Peter Bendor-Samuel, the chief executive officer of Everest Group, a Silicon Valley-based IT advisory and research firm. “Increased friction of getting visas for offshore workers constrains the old model of moving hiring in India and other low-cost locations and then moving workers as they mature to onshore assignments,” Bendor-Samuel said.

According to US research institute NFAP, the denial of H1-B visas — the most common gate pass used by Indian tech workers into the US — has reached an all-time high. All major IT companies have had to deal with a higher number of applicants being turned down. Infosys has said it was working on “value additions” to its Indian employees to offset the disappointment.

ONSHORE, AHOY!

Various other reasons are also contributing to this shift, according to Bendor-Samuel.

“(There is) increasing pressure from clients to have a more diverse workforce,” he said.

Infosys, he said, has reaped benefits from onshore investments.

“They have combined their hiring with commitments to strategic cities and universities and created significant PR advantages while achieving similar economics to their offshore model,” Bendor-Samuel pointed out.

Indian IT service delivery companies have, however, weathered the visa regulations disruption quite well, said a former executive with software industry body Nasscom.

“Indian companies have hired more locally, but the fact remains that there is a problem with ease of mobility of technical talent in the US,” the IT industry veteran, who did not want to be named, said. “In sum, Indian IT companies have adapted to the business environment and coped well, as against the earlier narrative that the IT industry will choke on these regulations. That didn’t happen.”

Analysts have also said that the visa restrictions against India should not be seen in isolation.

According to data from the US State Department, non-immigrant visas -- which include the H1-B visas -- to China has been falling since 2015, from 2.62 million to 1.46 million during the 2015-2018 period, while India managed a small increase from 960,000 to 1.06 million.

However, in 2018, non-immigrant visas to India dipped, though by a minuscule 2,530, the first year it has fallen in a decade. For technology companies on the cusp of expansion in the Unites States, the pace of hiring locally has been hectic. San Mateo-headquartered Freshworks, a Chennai-born Unicorn now going global, has chosen Denver, Colorado, for its second office as part of its intent to be closer to clients.

Freshworks is planning to expand its San Mateo office — it now houses close to 140 people — even as it looks further for talent. On the heels of its founder-CEO Girish Mathrubootham moving to the US, it is populating its Denver office rapidly, and is slated to cross 100 by next year. “We anticipate more growth in the next year across both our locations in the US and will continue to look for ways to be closer to our customers,” said Suman Gopalan, chief human resources officer at Freshworks.

Again, having an office in the US purely to sell products is witnessing a shift. Freshworks’s San Mateo office houses the entire engineering and product development teams for its new customer success dashboard product Freshsuccess, which is a parlay of its recent acquisition Natero with some added capabilities.

Freshworks is also contemplating going public, one of the reasons why some companies may want a reassuring presence in the US, an analyst said, without directly commenting on Freshworks’ strategy.

“It was called nearshoring in the beginning, basically to move IT work closer to the clients, but now the push is also about technology: they [technology firms] need the UI [user interface] guys, the AI/ML and data science guys to drive more deals these days,” said Sanchit Vir Gogia, Chief Analyst and Founder-CEO of Greyhound Research.

Gogia was referring to how advancements in data and algorithms – which could be taught to make predictions based on past data (Artificial Intelligence) — are providing a pressing need for engineers.

In short, Indian technology firms are building from the grounds-up in the US. They have stepped up university hiring and are also replicating the hire-train-deploy model, followed for decades offshore. Lateral hiring, too, is on the rise.

“As more tech services projects become innovation-led, their onshore capabilities have grown sharply. Clients want to know whether a service provider has the onshore capabilities or the domain experts that have worked in respective industries in the US,” said Sangeeta Gupta, chief strategy officer of industry body Nasscom.

A recent report by Nasscom on the average wages paid by 52 Indian and India-centric companies also validates this stunning shift of focus towards onshore, in particular, to the United States.

Indian IT firms paid average wages of $96,300 in 2017, nearly 2% higher than the median wage of $94,800 in the overall computer systems design and related services industry in the US, it said in a joint report with IHS Markit, which sliced and diced data from the US Bureau of Labor Statistics, Nasscom member companies and other US government agencies.

American headhunters also say that cities like Austin and Seattle are becoming technology hubs at a pace equal to, or surpassing, that of Silicon Valley’s growth.

A 2019 Salaries report by HIRED, a marketplace for technology talent in the US, spells out the challenge for technology firms expanding there -- tech workers in America are expecting salary hikes sooner, it said. “One in three tech workers expect a raise within eight months of starting at a new company if they receive a positive performance review — possibly putting pressure on companies to boost salaries across the board,” it said.
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