Outsourcing: Lalit Dhingra, President Of NIIT Technologies (Part 6)

By Sramana Mitra and guest author Aditya Modi

Sramana Mitra: What is your shortlist? What are the towns on your shortlist right now?

Lalit Dhingra: I have short-listed a few, and we are very near closing on one.

SM: Do you mind sharing this list? This is a topic of immense interest to me and to the audience, because we are very interested in rural BPO and getting out the work to more regions.

LD: There are three towns I looked at. We looked at Macon, Georgia; Augusta, Georgia; and Utica, New York. Those are the top three because I could get affiliated with these three clients. They also have universities attached to them, and the cost of living is much much lower.

SM: And I noticed that they are all on the Eastern time zone.

LD: Yes. I looked at the Eastern times zones first.

SM: You looked at the Eastern time zones first. So, you are trying to build a nearshore Eastern time zone set of operations?

LD: Look at it from a different perspective. If you have a West Coast electric company that wants to outsource to India, for example, there is a time difference, correct?

SM: Very much so.

LD: Now, there is some overlapping. It is much easier overlapping with the Eastern time zone with India. So, if you were to give a solution, which is nearshore, which is the rural area plus India, together we can build 24/7 pretty quickly. And you don’t have to have three shifts. You might have to have two shifts to do a job. That is what my thinking is.

SM: Yes. When you are looking at you are looking at three or four destinations, what is your target size for an operation? Presumably, over time you are going to build different operations. What is the critical mass, or what is the target size of each operation? Or are you going to build one 6,000-person operation in Utica, New York?

LD: I don’t think we can build 5,000 to 6,000 in each location. I am looking at each rural [area having] up to a 600-, 750-, or 800-person facility, and then you can have around 3,000, 4,000, or 5,000 people in the U.S. in three or four locations in different time zones.

SM: Got it. That you can spread across different time zones as well. You can have something in the Central and Pacific time zones.

LD: First I am starting with these zones, then probably I’ll probably I’ll have two in Eastern Zone and one in Central Zone first before I start looking at the West Coast.

SM: And what kind of response are you getting from the governments of these towns that you are considering?

LD: Oh, very good actually, because this is job creation, right?

SM: Yes.

LD: If you get a section of 700 people, that is a huge operation for a small town.

SM: Yes. Would you give us some indication of what types of incentives are on the table?

LD: We’ve not yet found out what we’re going to get from them. I don’t think there are any tax breaks as such. They are maybe helping in getting property, helping to ensure the university talks to us and things like that, but I don’t know if there will be much in terms of tax benefits, in terms of financial benefits.

SM: That is interesting, because I remember India did its IT policy, which has been the big boom, and India has had tax breaks associated with it. I remember there was a five-year tax holiday for all IT companies.

LD: Yes, but that was not done in the U.S.

SM: No. There should be, in my opinion; don’t you think?

LD: Yes, but that is how the U.S. works, right? Not tax breaks on many things.

SM: Yes, but given where we are right now, think about it, you are going to have to compete on price. No matter what, you will still have to compete on price. The attraction of scaling a U.S. operation is going to be much more significant if there are some tax breaks versus not.

LD: Yes, you are right. But I don’t think the government is looking at this at this time. The state governments are more interested that you create [jobs]. Right now, the U.S.’s biggest problem is job creation, right?

SM: Absolutely.

LD: I don’t think what they are able to connect to by saying, OK, if you create jobs, this is what we will give you. For example, take the state of Georgia. The only thing I get is my name listed and the government saying that you guys are the top five who are generating jobs in Georgia.

SM: Which is not of much use.

LD: Yes. It is just making a list of 100 companies and saying, you are top five. It is OK, but that doesn’t give me anything, and probably I am able to meet the goal and that is OK. That doesn’t give me anything.

SM: The fact that there is a near shore U.S. trend in the outsourcing industry, and it is an opportunity for the U.S. to create jobs and get some of the jobs back that have been outsourced for a while, this is an opportunity. It is an opportunity that needs to be looked at with proper policy angle, including tax policy, and they are not doing it.

LD: That would be one topic for you to talk about it for your blog, right?

SM: Well, we are talking about it. All right, looks like we have covered everything. Is there anything else you want to talk about?

LD: No. I think you asked good questions.

SM: Thank you. Well take care, let us stay in touch.

This segment is part 6 in the series : Outsourcing: Lalit Dhingra, President Of NIIT Technologies
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