USAID to Cultivate Outsourcing Industry in Sri Lanka, Armenia

Includes: INFY, ORCL, WIT
by: Outsourcing Insider

By Audrey B.

The United States Agency for International Affairs, or USAID, has, in a controversial move, decided to fund the development of Sri Lanka’s, as well as Armenia’s offshore outsourcing industry.

In a move that was heralded on the US Sri Lanka Embassy website on the 2nd of August, the US government agency USAID in conjunction with the US embassy in Sri Lanka, announced a number of initiatives to be undertaken, one of which is a joint program with different unidentified private business process outsourcing and IT outsourcing companies. The initiative involves the training of over 3,000 under- and unemployed students on offshore business process support and English language training. They will then be participating in on-the-job training schemes with private firms. USAID is said to be contributing about $10 million for the project.

Meanwhile, on the 5th of August, news broke out that USAID will also be implementing a similar program in Armenia with one of the participating companies being Oracle’s (NASDAQ:ORCL) Sun Microsystems unit. It was not disclosed as to how much exactly would the agency contribute to the program but that the goal of the project was to establish Armenia as an IT outsourcing hub.

USAID’s moves to help bolster the outsourcing industry in Asia and Eurasia however, have sparked the ire of many Americans. On the political front, critics of the Obama administration has been quick to point out that it was the US president himself who wished to diminish offshore outsourcing of US jobs, including the IT sphere. A USAID spokesperson has said however, that the program “will not displace American IT workers.”

The outsourcing industry meanwhile, specifically Indian outsourcing companies such as Infosys (NASDAQ:INFY), TCS (NSE:TCS) and Wipro (NYSE:WIT), may find the new initiative advantageous. With the establishment of Sri Lanka as an IT outsourcing destination, companies can open new centers and expand their business in neighboring country Sri Lanka, rather than in other Indian cities where the cost is higher.

The move is expected to cultivate the two countries potential in the offshore outsourcing IT and BPO space. According to a report by the Everest Research Institute, there has been an increased activity in outsourcing with the continued recovery from the recession. According to the study, India still remains as the dominant offshore location with the Philippines and China coming in second and third respectively. Companies, however, want to spread their risks and thus may be looking to outsource to other destinations, which may very well place Armenia and Sri Lanka at the forefront, especially with the US-backed initiative. Comparable to other controversial outsourcing maneuvers undertaken by the US however, impediments are to be expected from the US public and the political arenas; whether the initiative will prove successful, or even whether the initiative will go ahead as planned still remains to be seen.

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