BANGALORE: As more and more American manufacturing companies shift production to the US and reduce their reliance on low-cost labour in China, Indian technology outsourcing companies are expecting a big boost in revenues from their manufacturing clients.
The country's top software providers, which work with the world's largest manufacturing firms, believe these enterprises will spend more on building and maintaining new systems for technology and supply-chain as they move production to the US. "This is an extremely important opportunity as more manufacturing arrives in the US,"said Sanjay Jalona, senior vice -president and global head of manufacturing and engineering services at Infosys, India's No. 2 IT services provider.
A rising number of companies in the US have been rethinking production strategies and this would see them ramping up investments in technology, giving more work to software outsourcing companies such as Infosys, said Jalona, who counts Volkswagen AG's US business as a client. From Apple to General Electric, a growing number of US companies have been moving part or all of their production to the US for reasons including political pressure to bring jobs home. These companies say they no longer see China as a cheap manufacturing hub due to wage inflation and rising real-estate costs.
A survey by The Boston Consulting Group in September last year found that 21 per cent of a sample of 200 executives were relocating manufacturing from China to the US, while 54% said they were planning to do this. Nearly half of the respondents cited rising costs and proximity to end consumers as the primary reason.
GE moved production of some of its washing machines from a factory in China to Kentucky last year, and Apple has been expanding its manufacturing in the US after poor working conditions at Chinese factories drew global attention. Others who brought manufacturing to the US include home-appliance maker Whirlpool, mining equipment maker Caterpillar and auto-major Ford Motor.
Technology industry experts say moving production from China, where most of the IT work is outsourced to state-owned companies, to the US, where working with third-party software companies is a norm, may put pressure on Indian IT firms to hold down their prices.
"There will pressure to price low if the support was being provided from a lowcost location,"said Ben Trowbridge, founder and chairman of Alsbridge, a Texas-based outsourcing advisory firm. Aloke Palsikar, global manufacturing head at Tech Mahindra said two of his top manufacturing customers have started shifting some of their work to the US.
"The opportunities for Indian IT companies will be in areas of shop floor automation, high-end robotics and new generation technologies such as 3D printing, which will take the manufacturing to an entirely different level,"Palsikar said. "Another set of opportunities would be in area of recreating the supply chain back to the US which has been hitherto China centric."