No effect of Obama’s tax reforms on LPO industry in India

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Outsourcing to India has always been and always be on the higher side whatever the case may be. There are many reasons fueling this fact and the most prominent of them are: India’s cost, quality advantage, young knowledge workers and its time zone that are making companies not just from the U.S. but from around the world to outsource jobs to India. No company wants to go bankrupt. Every company wants profits. And one of the best ways to earn profits in these recessionary times is surely outsourcing.

Mr. Barack Obama seems to be oblivious about the fact that in the days of globalization, by introducing protectionist policies he would not solve any purpose. By introducing tax reforms he may be able to revive the United States from the recession faster than expected and may be able to generate ‘few’ jobs in the field of market research, manufacturing etc. but surely wouldn’t be able to stop the outsourcing industry from flourishing. He should understand that it’s not about the U.S. anymore. The world works as a single unit with everyone connected to everyone in some or the other way.

Law firms and in-house counsel and attorneys wouldn’t be affected by the potential implications of President Obama’s policy that will seek to curb tax breaks on companies that outsource, but mostly it could affect relations with India, which is one of the world’s biggest sources of Legal process outsourcing (LPO) services. Even if it seems like a bad news, practically it’s not. Right now, by outsourcing jobs to the LPO industry in India, the law firms, legal counsels and attorneys in the U.S are saving up to 50% to 70% on their cost. Even if there are no tax breaks, this figure would end up close to 30% to 50% which is still a huge figure and can overpower the thought of taking away jobs from the LPO industry of India

Mr. Pankaj Parnami, Founder Director, KPO Consultants says “The LPO Industry would not be affected by the tax reforms. The lower costs and quality of service we provide from India will overpower these reforms and the overall effect would be nullified. There is no need to worry for India Inc.�

The current economic climate is forcing the U.S. companies to find more ways to manage spending, and outsourcing is a time-tested and appropriate decision. It is a catalyst for review of spending and use of capital. For every company that chooses to keep business functions in-house because of social backlash or political threats, there is another one who finds that the financial and organizational benefits are compelling enough to move non-core functions out of their company and offshore.

“The disparity between wage costs in the US and in leading offshore countries like India for similar jobs, output and quality is far too great to simply dismiss, especially when American CEOs have a fiduciary responsibility to shareholders.� says a top executive from a leading LPO firm.

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