TBJ: How Indian firms are increasing their footprint in the TriangleDate Published:
By Lauren K. Ohnesorge – Senior Staff Writer, Triangle Business Journal
Jul 13, 2018
The pursuit started with a memo from a state senator in early 2017. An Indian information technology services firm had Wake County in its crosshairs – 500 jobs on the line.
“Project Element,” which had already visited other states when Sen. Jay Chaudhuri got involved, wanted to be close to customers. It wanted access to talent. It wanted, Chaudhuri would insist, the Triangle.
It just didn’t know it yet.
“They just did a visit to Indiana,” Chaudhuri wrote to North Carolina Department of Commerce officials that February. “I’d like for us to clearly lay out why we are [a] far more superior place to do business.”
At the time, the state was chasing bigger projects, such as the 1,200-job Credit Suisse expansion in Wake County and the 2,250-job Allstate Insurance project in Mecklenburg County. But officials lobbied the Indian firm hard – a “full-court press,” Commerce Secretary Tony Copeland would say.
By July they had a deal – for a whopping 2,000 jobs.
“Element,” soon revealed to be Infosys, would become one of the largest projects in Triangle history – a banner win for Commerce in a year where nearly 3,600 jobs were announced in the region by foreign firms.
And it signaled a growing opportunity for the state, as interest from Indian companies has eclipsed even that of Chinese firms, officials say.
“Indian firms are finding us,” says Chris Chung, CEO of the North Carolina Economic Development Partnership, the state’s lead economic development agency in charge of recruiting for new jobs across the state’s 100 counties.
But what may be the most encouraging for the Triangle and North Carolina is not necessarily the creation of direct jobs, but the potential of further strengthening the entrepreneurial ecosystem.
According to the National Foundation for American Policy, more than 50 percent (44) of the 87 startups valued at $1 billion or more were started by immigrants, as of 2016. Out of that, 14 were started by individuals from India – the single largest group among all countries.
The theory, as experts explain, is that when Indian workers are moving to the Triangle with big companies such as Infosys and HCL, at some point a handful of them will leave those enterprises and start their own ventures – and most likely they would start those in the Raleigh-Durham area.
Economists say the Triangle is in prime position to keep being found – and to lure the bulk of that investment coming to the state.
But the importance and influence of Indian corporations on North Carolina started way before the recent wave of jobs announcements.
One led to another
In 2008, Rahul Singh, who heads up Indian IT firm HCL Technologies’ massive Cary campus, visited seven cities in six days before picking the Triangle. In 2014, he’d spearhead another aggressive search – this time for where to locate a 1,237-job expansion.
Cary became an easy choice, Singh recalls, pointing to the college-driven talent pool and the proximity to customers. Today, the firm has 1,500 employees in the town.
A year after HCL’s big announcement, Aurobindo Pharma, another Indian firm, saw an opportunity of its own in Durham, announcing a new research and development headquarters, 275 jobs and a $31.7 million investment. Within a month, it would disclose plans to scoop up a former Teleflex manufacturing plant for $2.9 million.
Just last year, Indian technology firm Zensar picked Durham over competing sites in Georgia, Texas, Indiana and California for its first North American customer delivery center, a 300-job project.
And those are just three companies, part of what economic developers have described as a pattern.
Indian investments have created a total of 4,000 jobs in North Carolina, according to state records.
And Indian opportunities are increasing, with thousands of jobs pledged from Indian companies that have yet to be delivered. Virtually all of it is earmarked for the Triangle, data from N.C. Commerce show. Of 14 Indian companies out of 100 Indian firms surveyed by the Confederation of Indian Industry in the state, 71 percent are in IT, though pharma opportunities are increasing.
Singh says the talent pool has been the area’s biggest asset to HCL. But the ease of doing business has influenced its decision to keep investing. “The personal commitment of leaders in the state, that helps us build a good business case and story for North Carolina,” he says.
North Carolina’s advantage
A.D. Amar, a professor of management at Seton Hall University, says factors have worked in North Carolina’s favor for some time. He points to the state’s weather and low cost of living as reasons it might be favorable to other locations in the U.S. for Indian investment.
“Indians feel very comfortable in the U.S.,” says Amar, a native of India who came to America as a student. “It’s the language, it’s the democratic system, the sense of freedom they enjoy in India, they can enjoy in the U.S. … There’s a lot of overlap.”
Economic factors are also at work, as India, like many places, is seeing a shortage of qualified people, he says. Cost of labor is on the rise.
“So they find the advantages they enjoyed in India to produce pharmaceuticals and other products for the U.S. market less attractive now than it used to be in the past,” he says. “It’s becoming more attractive for the American market.”
Amar, who led the Indian-Americans for Trump PAC in 2016, credits the Trump administration with recent increased interest, too. With Trump’s stance on strict visa limits, companies are increasing their in-country hires out of necessity, he says.
Ronil Hira, an associate professor of public policy at Howard University and research associate at the Economic Policy Institute, agrees that political pressure and “arm-twisting” have been leading to investments. He theorizes that Trump’s H-1B stance factored into Infosys’ decision to announce its plans to bring 10,000 jobs to the U.S.
And Raleigh, where Infosys is planning to locate at least 2,000 of those jobs, can capitalize on that interest, both with its talent and incentives packages, Amar says.
But the state’s biggest selling point might be the companies that have already come here – like Infosys and HCL.
“Every company that locates in North Carolina makes a big headline in India,” Amar says.
Maureen Little, vice president of economic development at the North Carolina Community College System, says companies can be the state’s best recruiters. In selling prospects on the custom training programs the community colleges can offer, her team often connects firms with companies such as HCL and Infosys that are already using those resources.
“Hearing that from other companies … that’s really where the rubber meets the road. That’s where the sale of North Carolina and the sale of customized training and our community colleges is critical,” she says.
Strengthening the ties
Officials say it’s hard to visualize the scope of the actual opportunity.
That’s partially because, while EDPNC has foreign direct investment offices in locations such as China, Japan and South Korea, no such office exists in India – even though the country has an astonishing 1.3 billion people.
The status quo in North Carolina has been that the opportunities find the state – not really the other way around, Chung says. But that may soon change, as India tops the priority list when it comes to FDI funds, he adds.
“The next step in that strategy is, how do we more proactively go after those companies that may be thinking about U.S. expansion?” he says. “It’s probably the biggest priority when it comes to that overall business recruitment aspect of what EDPNC does.”
Even without the FDI office, North Carolina ranks 16th among all states when it comes to Indian investment, with nearly $64 billion invested so far, according to the Confederation of Indian Industry (CII).
Chung believes that once North Carolina starts acting proactively, the opportunities could increase tenfold.
Out of 100 Indian companies surveyed by CII, the group found $17.9 billion had been invested in the U.S. overall, culminating in more than 113,000 jobs.
Chung wants a bigger piece of that pie.
Without an FDI office, the distance can be challenging, as it can literally take days for scouting executives to reach North Carolina without a nonstop flight. And EDPNC handles the bulk of its Indian dealings from its Cary office.
While there are plans to recruit a flight to China, at this time there are no such plans for India. Mike Landguth, CEO of RDU Airport Authority says it comes down to airline opportunities, which just aren’t there.
“We’ve looked at it,” he says, noting that, for now, RDU is focusing on markets with established infrastructure – such as its long-sought China flight recruitment effort. “If the situation changes, we’ll look again.”
For now, the straightest shot may be RDU’s nonstop flights from London and Paris. And Landguth says those flights – and the connectivity to other international markets that they bring – can boost economic development pitches, including those to Indian firms.
Incentives and visa-heavy workforce
Jack Narcotta, a senior analyst with Strategy Analytics, predicts investment will flow both ways.
Narcotta, who has covered mobile devices for multiple research firms, says that, while the U.S. has largely gone through the 3G to 4G transition, there’s potentially a billion users “coming into more advanced handsets.” And that’s just one market where U.S. firms can benefit from Indian investments. He says it’s likely that companies in North Carolina will discover more opportunities in the future – and that increased awareness through investments here could fuel that interest. India, he notes, doesn’t prompt the same IP concerns as when technology companies invest in China.
“There’s a good mix, a customer base that’s really hungry for new devices and new technology,” he says, predicting more synergies between the two regions in the years to come.
To win projects, North Carolina will likely have to stay competitive with its incentives packages. Metros across the U.S. have become more aggressive in recent years, says site selection expert John Boyd with the Boyd Company. He calls incentives a necessary “barrier to entry” when it comes to making an economic development short list in 2018.
But Howard University’s Hira questions the ethics of using of incentives to lure in these firms – particularly those in IT services, the arena that includes both Infosys and HCL.
Hira says the practice of offshoring is integral to the business model. An IT services firm outsources a company’s IT department, moving it to a call center in India where labor is cheaper, he says. It’s a move that displaces U.S. workers, and one he says shouldn’t be “subsidized” through incentives in North Carolina.
“Even if they’re saying they’re hiring locally… they’re going to be doing some of the delivery from offshore,” he says, adding that, “just because they’ve been arm-twisted by the Trump administration into hiring U.S. workers… that doesn’t mean they’re not offshoring a lot of the work. It’s their business model.”
And public records confirm that, even as Infosys hires in North Carolina to fulfill the promise it made last year, it continues to file applications for H-1B visas in the Triangle. The company saw 121 Labor Condition Applications for H-1Bs approved for fiscal 2018 in Wake and Durham counties. HCL was approved for 755 and Zensar for 126 (Cisco led with 1,087).
“So why would you subsidize this with incentives?,” Hira says of Indian IT services firms in general.
Through the recently passed budget, Republican lawmakers tried to address the visa issue, inserting a provision that would disallow H-1B visaholders from being counted toward milestones of “transformative” projects.
But it’s not just incentives, it’s also talent that lures companies to the Triangle.
Little says that’s true of all projects – not just those coming from India.
Little says the state needs to make sure it has a “ready population,” and that means identifying those who are underemployed and bringing the training to them. In addition to luring new projects, the community college system needs to ensure that people know about opportunities in sectors such as technology – and how its resources can help connect would-be employees to new skills, she says.
HCL’s Singh says companies such as his are already feeling feel the talent strain from the growing technology cluster. A decade ago, HCL was getting 10 to 12 resumes for every job opening. Now it’s closer to four.
“They have multiple options,” he says of job seekers. “We are facing competition now, and with Amazon and Apple considering the area, I personally feel this is going to be a challenge.”