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Wednesday, September 8, 2010

IT Stocks could be in trouble : Ohio bans offshore IT projects by govt depts

Here is the big news for IT industry in India, and whats more, it is not good at all. Ohio state in US has completely banned outsourcing of it's state government IT projects to offshore development. How does this affects Indian IT stocks?

This could be just a beginning and more US states could follow the same in order to keep the jobs in American soil and for Americans only. Check the related news here.

Last month, the US Congress passed a controversial legislation increasing visa fees for funding the country’s Mexico Border Security program. States such as Virginia are facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms.

Checkout my earlier article "Should you buy stocks of IT companies for long term?"


Although Indian IT companies could setup American subsidiaries with American employees to fight the anti outsourcing moves, ultimately where it boils down to is the profitability from investment perspectives. IT companies setting up more and more offices in US, employing more US employees means spending in dollars and in American standards which is very high when compared to their offshore development centers in India where they pay small salaries in INR and earn in dollars keeping big profits. These high profits gave very good returns in past which could not be the case going forward in future. And so it would be difficult to find multi bagger IT stocks in future.

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