The United States imposed a 50% tariff on most Indian exports, fulfilling its threat to increase it from 25%. Although they formally apply to goods, it is feared that tariffs can also trigger a domino effect on information technologies (IT) services. As strange as it may seem, the tariff war unleashed by the taxes of the “day of liberation” of the United States could now extend to services such as applications and online purchases.
India houses software service providers: companies that deliver and maintain applications for customers around the world. Reports have already been received that important Indian suppliers, such as TCS and Wipro, are experiencing delays in their projects because US clients adopt a position of “waiting and observing”.
The recent announcement of the Trump administration that will impose a rate of $ 100,000 for the new H-1B visas for qualified workers, popular among Indian IT professionals, uncertainty increased.
While US tariffs do not directly affect software services, they can create what is known as “side effects.” In other words, as companies of sectors affected by tariffs (such as retail trade and manufacturing) begin to receive additional costs, drastically cut discretionary spending on you.
This leaves less resources in their budgets for outsourcing contracts. My research on other types of impacts in countries that provide IT services showed that similar pressures arise.
All this is important because consumers – the end users of bank applications, hospital portals, online purchase platforms and delivery systems – depend on Indian software suppliers much more than they believe. Almost 60% of the world’s main companies outsource their projects from IT to India, and the country maintains much of the digital infrastructure that supports all these systems.
For example, an Indian team could manage the patient management system of an American hospital. When tariffs increase hardware costs in the US, the hospital can delay the incorporation of new functions, such as online appointment reserve.
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The cost of tariffs in the US will inevitably reduce budgets, which could force organizations to pause, reduce or cancel IT projects. For consumers, even outside the US, this can be translated into slower updates, longer failures and waiting for appointments that are managed on online platforms.
If the rates reduce customer budgets and delay IT contracts, buyers in Europe or Asia could suffer failures, slower updates or interruptions in payments. A global interruption in 2024 caused by a defective update of the American cybersecurity company Crowdstrike caused the suspension of flights and disturbed retailers around the world. This demonstrates the speed with which digital crises in the US can have an impact on consumers around the world.
A study revealed that some US client companies and the United Kingdom finished IT projects when political instability in Pakistan hindered the predictability of delivery. An American customer, for example, paralyzed software development, leaving the team outsourcing halfway in an update of the system. This meant that end users never saw the new function and Pakistani software companies lost their largest customer with the US.
Other investigations have discovered that a sudden increase in terrorist attacks in Pakistan between 2008 and 2009 caused a delay in the delivery of critical information to IT teams that worked in software. This caused errors to persist and left end users with defective or obsolete applications.
Keeping the services in operation despite tariffs
When they are pressed, outsourcing companies protect the end users of software restructuring project management instead of depending on price reduction or goodwill. My recent study, conducted with colleagues, revealed that resilient companies adapt on the march, moving the work to offices or support networks when interruptions occur, so that users can continue accessing the systems, even during the blackouts.
If US tariffs reduce customer budgets and similarly interrupt the project portfolio, outsourcing companies could respond in the same way. This could mean reallocating tasks, modifying delivery deadlines or opening local offices to protect the end users of service interruptions.
Other investigations show that suppliers modify the processes in the middle of the project when the rules or needs of the client suddenly change. To manage complex tasks, such as the 3D application of an orthodontist, for example, a company could decide to divide the work. This could involve sending small equipment abroad or opening offices near the US clients or the United Kingdom for sensitive tasks, maintaining most of the code abroad.
We, as end users of software applications, are not mere passive receptors. Our research on software companies showed that when regular users demanded applications with a good aspect and impeccable operation, companies moved that pressure directly to their outsourcing partners in countries such as India and Pakistan. In fact, consumers’ expectations leaked up.
In short, tariffs are not mere abstract commercial measures. They apply to customer budgets and outsourcing contracts, which could influence the speed with which applications or proper functioning of the systems are updated. For end users, this can translate delays in the incorporation of new functions, failures or systems that are blocked just when they are needed.
*Umair Choksy is a professor of administration, University of Stirling
This text was originally published in The Conversation
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