US tax move sets new pace for outsourcing jobs growth

In moving to stop outsourcing by US firms, the Obama administration is hoping to stop an escalation in job losses at home that last month passed the 10 per cent threshold despite recent signs of economic recovery.

To shield their businesses from the looming loss of tax benefits, some US companies are also moving out to acquire established operators in foreign countries for a possible interfacing of future operations.

Last week, for instance, 15 US investors arrived in Kenya in search of acquisition or buyouts candidates in various sectors including IT.

“Kenya is attracting a number of US firms who are looking for top talents in the ICT sector especially in software development. They however do not want to make the moves public because of what is happening back at home,” said a senior Ministry of Information official who asked not to be named due to the sensitivity of the matter.

Other than enabling local companies to reduce the amount of money they need to set up base in foreign markets, acquisitions or mergers should enable local companies to ride on the relationships for knowledge and insight they need to do business in the new environment.

That will however require that they involve the equity partners in fundraising efforts that will be required to pull the deals through.

US is the top IT and ICT-enabled service exporter, accounting for $270 billion in 2007.

A recent UNCTAD report indicates that the outsourcing business is still heavily dependent on foreign clients even in mature markets such as Philippines.

Major local BPO and contact center operations in Kenya depend on foreign clients with local corporations such as banks, insurance companies and telecommunication operators preferring to have their call center in-house (captive).

A change in the global arena and lack of financial ability to set up offices in foreign countries places yet another hurdle on the path of Kenya’s nascent BPO industry that is only beginning to overcome the high cost of international connectivity with the landing of fibre optic cables in July.

A state of the global outsourcing industry report says reverse outsourcing is likely to continue to grow.

More than 50 per cent of India’s outsourcing company revenue is expected to come from North American clients, making the movement to the US critical to their continued survival and growth.

Outsourcing firms

“Not only will the US center provide closer proximity and enhance services to clients, the facilities will also enable the outsourcing firms to draw from the local talent pools” reads the report.