Global IT services companies and their contribution to the US economy

Global IT service companies that are India based or India-centric operating in the US have been increasing their presence both in terms of hiring US workers as well as opening offices and training facilities. These efforts not only increase jobs but also contribute to their local economy via their operational and capital spending and through the volunteer work and charitable donations that the companies and their employees make in the local economy and throughout the US. A series of independent reports by IHS Markit, commissioned by NASSCOM, details the contribution these companies make to the US economy.

Two of the reports, Employment Trends and Economic Contribution, launched in Washington, DC on March 8th, 2019. These reports found that employment at this subset of global technology services companies is growing faster than its industry as a whole - averaging 3.8% per year versus 2.6% (between 2016-2018). Furthermore, these companies are growing quickly in states that are not typically thought of as "IT hubs" such as Minnesota, North Carolina and Illinois. They also hire a higher share of computer employees than their industry as whole; thus, creating more high-skilled jobs in the US. And these jobs are largely being filled by US citizens and permanent residents whose share of employment as these companies has been rising relative to workers here on temporary visas.

In terms of their economic contribution, our analysis found that in addition to their direct contributions, i.e., the dollars they spend in the US to operate and build new facilities and purchase equipment as well as the people they hire directly, is multiplied as their vendors make purchases and hire people. We found, in 2017, the nearly 170,000 US-based jobs at the subset of global IT services companies ultimately supported an additional 337,932 jobs across the US economy, totaling more than 491,000 direct, indirect and induced jobs. Additionally, for every $100 of revenue earned by the subset companies in the US, another $103 dollars was contributed to US GDP and for every $100 paid to the subset of global IT services companies' employees, another $108 of wages were paid to other workers across the companies' purchasing networks and in the broader economy.

Our analysis shows that nearly every sector in the US economy - from food to energy to housing and more - is impacted by the subset companies' operations and capital investments in the US. Some sectors that especially benefit from the US activity of these companies are the Professional Services, such as accountants and architects, Financial Services, such as those that help facilitate payments and make loans and the Manufacturing sectors.

We used both a survey of member companies as well our own data and other public and proprietary data sources to conduct the analysis. In order to perform the economic impact analysis we used our standard input-output approach but customized the production function for their industry to better capture the operations of this subset of global IT services companies. The survey asked detailed questions that included asking for information on their charitable activity. While we did not estimate the indirect and induced contributions from their volunteer hours and dollar contributions to charities both local and national, we did find that their direct charitable activity is significant and wide spread. Some examples include:

• Providing and teaching technology in schools;
• Delivering school supplies to children in underserved communities;
• Assisting people who are struggling with food insecurity; and
• Providing aid to victims of local natural disasters such as Hurricanes Harvey and Irma in 2017.

Among the beneficiary organizations were the American Heart Association, March of Dimes, Red Cross, and the Leukemia and Lymphoma Society, to name a few.

NASSCOM continues to use the research to help educate policy makers and other stakeholder groups on the contributions their companies make the US economy.

Posted 08 July 2019 by Karen Campbell, Principal Consultant, James Gillula, Consulting Director, Bob Flanagan, Consulting Director, Dan Mclaughlin, Senior Consulting Analyst, Mohsen Bonakdarpour, Managing Director, and Rich Fullenbaum Consulting Executive Director, Economics and Country Risk Consulting, IHS Markit