From H-1Bs To Growth: Why Wipro's Buying Into The U.S. IT Market - InformationWeek

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From H-1Bs To Growth: Why Wipro's Buying Into The U.S. IT Market

The Indian company's in the middle of buying a U.S. data center management company and plans to open as many as four software development centers staffed with local hires.

Wipro Technologies, the third-largest Indian IT outsourcing company, is putting down roots in the U.S. of A. In the latest sign that the business is becoming truly global, Wipro is paying $600 million for a U.S.-based infrastructure management provider and planning to open a software development center in Atlanta that could employ 1,000 people in the coming years.

Wipro is buying publicly held Infocrossing for its 900 employees and five data centers, including one at its Leonia, N.J., headquarters. It will cater to U.S. businesses that want to outsource but aren't keen to have their data offshore. As for the Atlanta development center--and three others on the drawing board for southern U.S. cities--Wipro needs those because its biggest U.S. customers want some people available locally.

Although they didn't say so, Wipro and other Indian IT companies may be hitting capacity in tapping the U.S. H-1B guest-worker visa program. Wipro hired 4,002 people on H-1Bs just last year--the second highest of any company, trailing only Indian rival Infosys' 4,908, according to congressional research.

From Bangalore to Leonia

From Bangalore to Leonia

Photo by Sacha Lecca
The Wipro-Infocrossing deal isn't even the biggest cross-border outsourcing acquisition this year. In June, Caritor--an application developer based in California, but whose 3,900 employees are predominately in India and whose founder is Indian--acquired U.S. IT services provider Keane in an $854 million deal backed by Citigroup Venture Capital.

The U.S. deals are a mirror image of what the largest U.S. IT services companies, including Accenture, EDS, and IBM, are doing in India: hiring thousands of Indians and buying local companies. IBM now employs more than 50,000 in India, doing work that ranges from remotely running data centers to custom developing SOA-based systems that its consulting army resells to customers.

Likewise, Wipro, a $4 billion-a-year company best known for offshore application development services, needs to broaden its appeal and commit to new markets abroad. Before the Infocrossing acquisition, Wipro's services might have been attractive to two out of 10 U.S companies, says Dean Davison, VP of research at offshore consulting firm NeoIT, but now they should appeal to seven out of 10. Some U.S. businesses hire outsourcers to run their data centers, but many aren't comfortable having their data outside the United States, for intellectual property protection and other reasons. A New York company, The Buying Triangle, is now fighting Infosys in a U.S District Court, claiming that Infosys refused to release its data after it canceled an outsourcing contract with the vendor because of poor performance. Infosys says it met the terms of the contract and is owed money.

Wipro needs more employees in the United States to service large customer contracts, ranging from $500 million to $1 billion, says Sridhar Ramasubbu, the company's CFO for the Americas and Europe. He notes that Wipro's U.S. moves augment its expansion in other countries, including Brazil, Canada, China, Mexico, and several European countries, where it also has development centers up or planned.

Wipro plans to open the Atlanta center in three months and staff up to about 1,000 within three years. The likely locations for three more development centers are Raleigh, N.C.; Austin, Texas; and Richmond, Va.

Even if it follows through on the plan, no one's going to mistake Wipro for a U.S. company. It ended last quarter with 72,137 employees, the vast majority of them in India. The kind of hiring it's considering in the United States is small potatoes for the company--worldwide, it added an average of 1,400 employees a month last quarter, racing to keep pace with its 34% sales growth. Profits grew much slower, though, at 16%.

That gets to the sticky question: How will Wipro keep profits up if it's hiring more, and presumably more expensive, U.S. labor? For one thing, the company will focus on U.S. candidates with associate's degrees rather than more expensive people with bachelor's or graduate degrees, Ramasubbu says. It also will look to recruit ex-military personnel looking for career transitions. Once hired, Wipro will train people in its software development process and pay the best to earn bachelor's degrees in software engineering, he says. That kind of effort's nothing new to Indian IT firms, which run massive training programs to get their new recruits--many of them just out of college and unprepared for the workforce--up to speed.

Infosys and Tata Consultancy Services, Wipro's two biggest Indian outsourcing rivals, didn't reply in time for publication about their U.S. employment plans. Infosys and TCS together employ about 15,000 foreign nationals in the United States on H-1B visas. S. "Paddy" Padmanabhan, TCS's executive VP of global human resources, has previously said that within three to five years, 20% of the company's workforce will likely be outside India.

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