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Ohio bans outsourcing of govt IT projects

Last Updated: Wednesday, September 8, 2010 - 23:53

Zeebiz Bureau

New Delhi: In a bid to ensure maximum employment opportunities for local people, the US state Ohio has banned outsourcing of government-funded IT projects to other countries including India.

"There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore," Ohio Governor Ted Strickland said in an executive order passed last month.

Ohio administration’s decision is a double whammy for Indian IT companies, which is already hit by the Obama administration’s decision to increase the H-1B visa fee.

The US is the largest overseas market of India’s IT industry.

With unemployment rate is running as high as 9.6 percent in the US, the Obama administration, which is facing a litmus test in November’s Congressional elections, is looking for all possible actions to create jobs.

Ohio’s unemployment rate is at 10.6 percent, higher than the national average. Foreign companies fear that other US states might also follow Ohio and ban outsourcing of government-funded IT projects.

However, analysts said this would not affect Indian companies much as they largely rely on private firms for the bulk of their business.

TCS is the only Indian company to operate in Ohio. It employs 300 people and gets USD 19 million in tax credit for creating local jobs, an Indian business daily reported Wednesday.

India Inc reaction

The Indian IT sector, which gets 60 percent of its export revenue from the US, Tuesday said the move by the state of Ohio to ban outsourcing by government departments to offshore locations like India is discriminatory and amounts to a trade barrier.
Through an executive order last month, Ohio Governor Ted Strickland prohibited the expenditure of public funds for services provided offshore.

The move comes ahead of the impending visit of US President Barack Obama to India in November. It also follows a controversial legislation (border security law) increasing H-1B and L1 visa fees, hitting India`s over USD 50 billion IT industry.

The Indian industry will take up the issue with its US counterparts and seek government support to flag it with the American authorities.

"Nasscom is leading a delegation to the US later this month and will be taking this up with relevant officials in the US," the apex body of the IT and ITES industry said here.

With PTI inputs

First Published: Wednesday, September 8, 2010 - 23:53
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