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SQL Star Increases Talent Pool With Recent Acquisition

In a move that underscores the increasingly global nature of the information technology industry, a public company in India acquired a fast-growing San Diego staffing firm specializing in technology professionals to expand its foothold in the region.

TalentFuse Inc., a 6-year-old firm providing skilled engineers and other professionals to local tech companies, was acquired recently by SQL Star International Ltd. for $20 million, said Brian Margarita, founder and president of TalentFuse. SQL is based in Hyderabad, India, and has a San Diego office.

The tech staffing and IT services industries in India are getting so large that companies there are buying smaller companies in the United States and setting up direct client relationships with domestic technology firms, Margarita said.

“The Indian companies are becoming so successful that they are dealing directly with their American clients,” he said. “The acquisition gives TalentFuse a tremendous competitive advantage by providing clients the options of having a steady flow of top IT personnel for projects, or developing and managing entire projects in-house.”

Margarita, 34, said he will remain as president of the firm that will retain the TalentFuse name.

The business has two offices in San Diego, 100 contracted employees, and 23 direct employees.

Calls to SQL Star at its office in San Diego were not returned.

In the announcement on the transaction, Raj Ganti, chief executive of SQL, said the deal is significant because it gives SQL “the ability to create our own channel within the IT industry for importing H1-B employees, a critical requirement for most large customers who elect to outsource.”


H1-B Program

The nation’s H1-B program permits domestic tech companies to import trained engineers and scientists when the firms prove the same jobs cannot be filled from applicants living in this country. The 65,000 visas that were released in April were exhausted on the first day, said San Diego immigration attorney Ginger Jacobs.

The rise of Indian IT firms is nothing new.

Many international corporations have been outsourcing back-office functions and call-center work to India and other low-cost labor nations such as the Philippines and Pakistan for more than a decade.

But in recent years, the largest Indian IT firms have been buying up smaller technology consulting firms to enable them to work directly with U.S. clients.

Among the largest Indian firms making inroads here are Tata Consultancy Services Ltd., Infosys Ltd. and Wipro Ltd., all with sales in the billions of dollars.

Margarita said TalentFuse and new owner SQL are trying to emulate what Wipro has achieved.

That firm reported sales last year of more than $3 billion.

Last year, SQL acquired SolutionNet, a $5 million IT consulting firm with offices in Dallas, New Jersey, Singapore and Australia.

Through that acquisition, SQL opened an office in San Diego, and has been working as a subcontractor with TalentFuse. Talks concerning the purchase of the staffing company began in earnest in January, Margarita said.

According to its Web site, SQL Star reported revenues of 7,074.47 rupees lacs for the year ended March 30. That is $17.7 million in U.S. dollars, up from $9.4 million for the prior fiscal year.

The fact that an Indian IT staffing firm was operating here didn’t bother Marlene Garcia, director of technology consulting at Kforce Professional Staffing’s local office.

“We don’t compete with (Indian companies). We partner with them,” Garcia said. “It may be their way of establishing a U.S. beachhead in order to eliminate the middleman.”

Five percent of the workers that Kforce has placed locally require H1-B visas, Garcia said.


Market Tight

Kanani Moser, director of the technology division for the TriStaff Group here, said the market for skilled engineers and other tech professionals is probably as tight now as it was during the height of the dot-com boom era in 1999.

But in many instances, the positions aren’t being filled by foreign workers but by people already working at another company, Moser said.

Foreign-born engineers and scientists are increasing much faster in San Diego than in other areas of the state and the nation, according to a recent draft report done for the San Diego Partnership for the Global Economy, a consortium made up of the San Diego Regional Economic Development Corp., the city of San Diego and the San Diego Institute for Policy Research.

The report found that from 2000 to 2005, foreign-born technology and science workers increased to 32 percent from 24 percent of the entire tech work force.

Doug Henton, president of Collaborative Economics, the firm that did the report, said Indians and other foreign-born workers are coming here in larger numbers because of the presence of UC San Diego, and biotechnology, telecommunications and software companies, three key industries flourishing in the region.

The partnership report also found that workers from India make up the largest percentage of the foreign-born workers , 12 percent in 2005, up from 6 percent in 2000.

Duane Roth, chief executive for Connect, a nonprofit organization aimed at helping entrepreneurs, said the influx of foreign-born technology workers is a plus for the San Diego economy.

“If you think that we know it all, we’re kidding ourselves,” Roth said. “The talent that is coming from the foreign countries tends to be the cream of the crop. If you can bring the best and the brightest, that will make a company stronger.”

Kevin Carroll, executive director for San Diego AeA, the trade group representing the technology industry, said the competition for the best talent is reaching a level that hasn’t been seen since the dot-com boom.


Critical Stopgap

“The demand is far outstripping the supply of workers, and foreign-born workers are supplying a critical stopgap to the demand,” Carroll said.

Margarita launched TalentFuse in late 2001, with $100,000 in capital. In 2002, he had sales of $1.8 million.

In subsequent years, he said sales about doubled annually. For the most recent fiscal year ended in April, the firm generated $15 million in sales.

Among TalentFuse clients are Qualcomm Inc., Intuit Inc. and Invitrogen Corp.

The fact that an Indian company is setting up shop in San Diego and bringing in workers is better than had the work been exported to India, said Warren Carter, chief executive for Qualifind Inc., a Chula Vista staffing firm.

By having the worker based here, it’s creating a number of other support jobs to the better paid engineering position, and keeping the money in this region, Carter said.

Roth said domestic universities aren’t producing the number of trained engineers and scientists to fill slots created by the tech industry, so it’s not like these jobs are being taken from American-born workers.

“Is it better if you have American-born kids filling those slots? Yes,” he said. “But in the end we have to be able to find talent wherever that talent is.”

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