India-Canada row: Experts warn new IT deals to be hit

With India last week suspending visa services for Canadian citizens, IT experts cautioned that the development will impact the ability of Indian IT services companies to secure new deals. They also say that if the row escalates further, public sector clients will look for alternative nearshore options.

Peter Bendor-Samuel, CEO, Everest group, said, “At this time, it’s a mild frustration. However, if this stretches, it will first impact Indian-based firms from winning new business and will eventually cause firms with business already in India to consider relocating it to another country.”

Joel Martin, executive research leader, HFS, said, “As India has begun escalating its row by limiting visa applications and travel to India by Canadians, it is fair to expect the possibility of the flow of talent between Canada and India to be impacted. This can have an impact on Indian IT Services firms dealing with public and private organisations.”

Martin added that while there are proven offshore models to mitigate this, some Canadian firms, especially those in the public sector, may actively seek alternatives to ensure they receive nearshore access to talent. Revenues for IT firms from Canada is in the range of 5-6%. Top-tier IT firms like TCS and Infosys have recently taken up work from government departments and organisations in Canada.

In July this year, Infosys Public Services (IPS), the North American subsidiary of Infosys, opened a new step down subsidiary – Infosys Public Services Canada (IPS Canada) – to accelerate digital transformation for public sector organisations across the country. Last year, TCS entered into a strategic partnership with Payments Canada, the country’s largest payment organisation, to transform its payment system operations and help implement the new real-time payments system.

V Balakrishnan, chairman, Exfinity Ventures and former CFO of Infosys, said, “In the short term, IT companies can work more from offshore or probably move some work to other centres in the US.

Peter added that for the relocations to occur, the visa issue and diplomatic spat would need to go on for more than 6 months before serious relocation efforts start to occur.

When asked about Canadian clients’ travel to offshore locations in India, Balakrishnan said the world has got used to remote working after the pandemic. “So short term, they can do zoom or other calls and manage it. But, if this issue persists for long and escalates further, then there could be issues.”

R Srikrishna, CEO, Hexaware, said to Emkay Global analysts recently that there could be some implications for the IT industry due to the deterioration in the relations and therefore de-escalation is essential.