Mumbai Attacks Don't Faze Tech Firms

The deadly shootings have raised questions about whether India's tech centers are still as attractive to U.S. firms looking for low costs and fast profits.
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The recent terrorist attacks on

Mumbai

, which left more than 170 people dead, have focused attention on the country's booming tech sector, which is crucial to U.S. firms.

With its vast, highly skilled workforce and low cost of business, India's tech industry has exploded in recent years, most notably in its "Silicon Valleys" of Bangalore and Hyderabad. American companies such as

Hewlett-Packard

(HPQ) - Get Report

,

IBM

(IBM) - Get Report

,

Cisco

(CSCO) - Get Report

and

Intel

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, for example, have all flocked to India, building research and development facilities, support centers and sales offices.

But, after the country's financial hub was crippled by a small group of highly trained terrorists, are India's technology centers still as attractive to U.S. firms looking for low costs and fast profits?

"I could see it resulting in a little more hesitancy on the part of companies considering moving out there," said Graham Titterington, principal analyst at technology research firm

Ovum

.

India's outsourcing industry, which generates around $11 billion in revenue each year and is projected to reac $50 billion a year by 2012, could also feel the effects of the Mumbai attacks, according to Maxine Holt, senior research analyst at

Butler Group

.

"It might make potential new outsourcers to India think twice," she said, adding that firms operating in India will also be focusing more attention on security and risk management.

Despite these challenges, however, both analysts feel that India remains a viable option for U.S tech firms, both as an outsourcing location and as a permanent base.

"I don't think that it will radically affect the cost of business," says Titterington, adding that U.S. firms in India are well aware of the country's history of terrorism and unrest. Additional security costs in the aftermath of Mumbai, although likely, should hardly break the bank, according to the Ovum analyst.

"The cost of the extra security guards is not that great in terms of the overall cost of running a facility," he says, adding that the Indian government is also likely to bolster security in tech centers such as Bangalore and Hyderabad.

Some firms, however, may still need to boost their emergency planning efforts in India during the coming months, which could have some financial impact. If crucial facilities become unavailable in one city, for example, firms will need an immediate back-up site elsewhere. "If you decide that you need not one

call center, but two, a few hundred miles apart, that could have an impact on the cost equation," says Titterington.

The carefully orchestrated attacks in Mumbai were clearly timed to disrupt the country's economy at a time when it is wrestling with rampant inflation and the effects of the global economic crisis. In response, the Indian technology industry is keen to assure the rest of the world that it is still a good place to do business.

Even while the battles were still raging across Mumbai, the

National Association of Software and Service Companies NASSCOM

, the trade group for India's outsourcers, issued a statement promising not to "bow down to terror."

"We continue our operations, uninterrupted, from centers across India and even Mumbai," the statement said. "Increased precautions are being undertaken to ensure the safety and security of our employees, facilities and visitors."

India, which faces fierce competition from emerging nations such as China and Russia, should emerge from the current crisis with its tech sector intact, according to Butler Group, whose parent company has an office in Hyderabad.

"The overall feeling is that organizations don't want the terrorists to win," said Maxine Holt. "Ultimately, it shouldn't harm India in terms of their outsourcing capabilities."

India has certainly proved popular with U.S. tech companies over recent years, both as an outsourcing center and as an actual business location. H-P, for example, has more than 29,000 employees working at 42 sites across the subcontinent.

With two centers in Bangalore, H-P was unwilling to discuss its Indian business when contacted by

TheStreet.com

this week. A spokeswoman declined to comment on whether the firm is re-evaluating its security strategy in the aftermath of the Mumbai attacks.

Inevitably, security is a sensitive topic at the moment. IBM, which is said to employ more than 70, 000 people in India, did not respond to

TheStreet.com

's requests for comment.

Other U.S. firms were more forthcoming.

Networking giant Cisco, which has 4,000 employees in India and a major research and development facility in Bangalore, reiterated its commitment to doing business on the Indian subcontinent. "We are fortunate that no Cisco employees were harmed during this tragedy, and we will continue to move forward with our business plans in India," wrote a Cisco spokesman in an email. The company is constantly testing its security plans, he added.

A spokeswoman for storage giant

EMC

(EMC)

, which has around 2,000 employees working at various Indian locations, including Mumbai, explained that last week's attacks have not affected the company's local operations.

"All EMC employees based there are safe and accounted for, and we have taken strong security measures for the continued safety of our employees and facilities across the country," she wrote in an email.

Chip giant Intel has around 2,300 employees in India, the majority of whom are in Bangalore.

The events in Mumbai have not caused the company to rethink its Indian strategy, according to a spokesman.

"We have security in place at all of our facilities worldwide, and we monitor threats on an ongoing basis," he told

TheStreet.com

. "But we don't go into specifics for obvious security reasons."