US govt chooses onshore over offshore in 2 big new projects

It is learnt that, the deal amounting to USD 320 million is for testing, infrastructure service and insurance space. Sources also say that Infosys and IBM are front runners for the deal.

Another deal worth USD 400 million for 6 years is in the regulatory space. Most large IT vendors have bid for regulatory deal, add sources. Both the deals have mandatory clause of no offshoring.

Pricing will be hit if there is an increase of onshoring model by the US government. While there has been a strong anti-offshoring driver at least in specific context with the US government, sources say lately there has been a trend of couple of contracts which have a mandatory clause for no offshoring.

So aside from the fact that this obviously reduces the number of jobs that could have been created, for the Indian IT sector, this means there will be substantial hike in pricing as well. These are US government deals and so far private deals have still been in focus on onshore-cum-offshore model with around 70% going to offshore.

As long as this doesn’t hit the private sector, it should be fine considering the US government has been slightly slow on contracts. But if this does start transferring on to the private sector, this will substantially jump up pricing. Analysts says that at least within the next two quarters it will hit the numbers immediately.

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