Draft Report of the High Level Group on Services Sector

2.2 Strategies of Indian IT- BPO companies

Indian companies adopt all the modes for supply of IT services abroad. The larger companies have set up wholly owned subsidiaries in the USA, the UK and the European continent or have opened branches to facilitate the supply of services. Some of them have adopted the strategy of acquiring local companies or entering into strategic partnerships with them. They use the quality processes, innovative technologies and delivery models of acquired companies to penetrate the local market. They have permanent employees or hire consultants based in the host country. All four modes of supply, cross-border (Mode 1), consumption abroad (Mode 2), establishment (Mode 3) and movement of natural persons (Mode 4) are used. In the case of BPO services Mode 1 and 3 are predominant, while in the case of IT services the supplies are made substantially by means of Modes 1, 3 and 4. In the case of IT services Indian companies deploy human resources principally from India and sometimes from other foreign bases in order to provide on-site services and have also to send persons for business visits, prospecting, and sales. ‘The deployment needs vary across the lifetime of a project as initially the onsite-offshore mix may be as high as 50-50, with the onsite presence falling over time’ (Rupa Chanda). Whenever the supply is made through Modes 3 and 4 the investment and immigration policies of the host government become critical determinants of trade flows.

In the USA and the UK the operations are facilitated by the friendlier policies on these aspects, and the EU is known to be considering the introduction of the ‘blue card’ –an EU-wide work permit. However, so far the immigration policies in Europe have remained problematic because of long time lines, absence of internal market mobility and non-transparent and discretionary approval processes. A similar difference has existed between the investment procedures in the USA and those in the countries on the European continent. The situation has been epitomised well in the experience of one company, which reported that it took 3 hours to set up a branch in the USA against 4 months in Sweden (Rupa Chanda).