Obama's outsourcing stance political rhetoric: Forrester

ohn McCarthy, Vice President and Principal Analyst, Forrester Research, said Obama’s stance on outsourcing was just rhetoric. “I think you’ve got to step back and understand the position that he is in. He is looking at a world, where he is very clearly going to be probably facing 10% unemployment sooner rather than later,” he said. “That unemployment rate is going to stay that high well into next year. He is very nervous that he is going to face the mid-term elections in the fall next year where unemployment is still at 10%.”

On the Indian IT sector, McCarthy said the rest of calendar year 2009 and most of fiscal year 2010 for Indian IT will be a tough year. "The project work has dried up and because there is so much uncertainty in the economy, people aren’t making the big outsourcing decisions either," he said. "I think that is probably going to continue to play out as we bump along the bottom through the end of Q3 and potentially into Q4 from a calendar year point of view."
Here is a verbatim transcript of the exclusive interview with John McCarthy on CNBC-TV18. Also watch the accompanying video.
Q: You are here at a time when US President Obama’s comments on choosing Buffalo over Bangalore are still fresh and top of the mind. What is your own view on the US administration’s position on outsourcing? Are you concerned about the increasingly protectionist stance now?
A: I think you’ve got to step back and understand the position that he is in. He is looking at a world, where he is very clearly going to be probably facing 10% unemployment sooner rather than later. That unemployment rate is going to stay that high well into next year. He is very nervous that he is going to face the mid-term elections in the fall next year where unemployment is still at 10%.
So, I think he is putting a rhetoric out there to make sure that companies think twice before they do that and he is trying to preserve jobs. I think a lot of what he is talking about – his agenda for the next two years, for the rest of his term is already overloaded with huge items – healthcare reform, global warming, turning the economy around, and now he wants to pick off tax reforms. I am not sure what is really going on there. But my sense is that he is using as a podium to make sure that he challenges some of the thinking of these large companies.
He is not just talking about IT. He is also talking about all outsourcing, industries like automotive, general manufacturing and IT too. So, I think some of it is rhetoric and some of it is concern about the unemployment rate in America and what that is going to mean come election time in 18 months.
Q: From an Indian IT company point of view, how is the environment looking as far as IT budgets are concerned in the US? Do you expect deals to slow down further given the economic downturn we are in?
A: I think you have already seen it. I think you will continue to see it as a some small second and third tier put their results are over the next two weeks. I think the rest of calendar year 2009 and most of fiscal year 2010 for the Indians is going to be a very tough year. The project work has dried up and because there is so much uncertainty in the economy, people aren’t making the big outsourcing decisions either. I think that is probably going to continue to play out as we bump along the bottom through the end of Q3 and potentially into Q4 from a calendar year point of view.

Read the complete interview on moneycontrol.com