India’s second largest software services company Infosys Technologies Ltd on Wednesday voiced its concern over Ohio state’s move to ban IT outsourcing to offshore locations such as India, media reports said.

Kris Gopalakrishnan, CEO and managing director of Infosys, said the company is concerned with the new development in a US state regarding a ban on offshore outsourcing.
However, he said Infosys’s initiative in the public services sector is focused on creating a domestic delivery center in the US and hence it will not be affected.

The US state of Ohio has banned outsourcing of government IT and back-office projects to offshore sites like India, raising fears of similar moves by other American states struggling to cope with high unemployment rates. Virginia is facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms.

The Indian software sector is already paying higher visa fees following the controversial US Congress legislation to help fund America’s Mexico border security program amid protests against outsourcing in other US states and Ohio state government’s decision is seen as a blow to the Indian IT industry.

“There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore,” Ohio governor Ted Strickland had said in an order passed last month.

 TCS, which is the only Indian company to operate in Ohio, employs 300 people and gets $19 million in tax credit for creating local jobs.
Infosys established its subsidiary Infosys Public Services in June this year headed by Eric Paternoster after it identified the government outsourcing market as the next big opportunity.

Wipro, Infosys’s smaller rival, has a nine-year, $407-million outsourcing contract from Missouri for delivering healthcare services.

Wipro believes in the fundamental strength of the US economy and has invested in expanding our presence there through partnerships with States like Georgia where we have built a development center in Atlanta. We have also been focusing our investments and efforts in developing solutions for the government segment to help government become more effective and efficient. These moves & announcements seem counterproductive to Government's effort to reduce deficit, Wipro said in a statement.

The profitability of Indian software companies could be hit if other states in the US follow Ohio’s example and local staff in US are hired to deliver services. Indian companies are also likely to face loss of jobs following this decision.

Indian companies have been campaigning for offshoring work saying that the work actually improves the health and efficiency of American companies and government departments in the country.