‘Capping’ the American dream

The Indian IT industry has been surprisingly calm and quiet over the issue of slashing of H1-B visa quota. 

Even as the media has been crying hoarse on the issue, the IT chieftains maintain that this decision won’t hamper the bottom line of the companies. On the contrary, many think this move would give the much-needed impetus to the offshore business in India.

While, what the IT bigwigs claim may be true to some extent, it might not be the absolute truth. In all probability, the H1-B cap will have a major impact on most of the visa-related issues, prominent among them is the affect on HR deployment flexibility of Indian service providers, especially since alternative routes like L1 visa are also expected to be monitored more strictly. This could lead to a situation where there would be a push towards greater offshoring to get around the issue or a pressure on the US government from local industry to ease the restrictions if they face a shortage of employable talent locally.

According to Infosys CEO Nandan Nilekani, “It is certainly one of the key issues that needs to be monitored in the next few quarters along with rupee appreciation and the discontent with outsourcing.” Insists Gartner India’s principal analyst-IT services, Ravindra Datar: “Push for greater offshore components might increase, though it is not as if it will be an automatic decision to send more work offshore. Indian service providers will have to work harder at convincing their clients to send more work offshore.” 

Another fallout, experts suggest is that Indian companies would be forced to explore alternative ways of sending professionals abroad on L1 visa. However, most of them agree that it cannot be a direct alternative to H1-B in anyways. While companies are using it as the best possible alternative in the circumstances, its over use may lead to a more stringent monitoring by the US government, lest it defeats the purpose of reducing the H1-B quotas. 

Interestingly, a McKinsey study shows that for every $1 worth of outsourcing job done by an Indian company, $1.12 to $1.14 worth of value is created for the US economy. 

Statistics reveal that during the current year, despite the ceiling of 1,95,000, less than 80,000 have been used. This clearly indicates that demand for these visas is based on the economic needs of the US. 

According to Wipro CEO Vivek Paul, “Lowering of cap on the H1-B visas will have immediate impact, as the visas (already issued) are valid for three years and are extendable by three more years. We would like the visa cap to be high enough to allow market forces to decide the number.” 

Meanwhile, Nasscom has suggested a “professional services visa” under the WTO regime to facilitate the movement of professionals. 

Going by the numbers from top Indian IT companies, Infosys currently has around 4800 employees on H1-Bs and 1800 on L1 in different geographies–54% of them in US only and there are some more H1-Bs in the pipeline as well. Similarly Satyam has nearly 2000 employees working onsite in the US only. This clearly shows the onsite dependence of software companies and means that the reductions in H1-B visas would not only effect business onsite but there would be billing pressure on Indian companies as well.

A look at the background and things seem to fall in the right perspective. After heavy lobbying by businesses that wanted to raise the cap on the number of H1-B visa approvals, in 2000 the US government had raised the limit from 115,000 to 195,000 for years 2001-2003. However, the cap was set to drop to 65,000 in 2004 because the US government felt that while high-tech automation was reducing the number of jobs, the most qualified foreign applicants were filling up the fewer available positions leaving no scope for local employees. With a massive number of high-tech ‘native’ employees out of job, it was not only becoming tough for the government to justify the hiring of foreign workers, the Bush administration was also losing its popularity over the issue with couple of suicides aggravating the situation. Hence, the easiest and the most logical political move for the US government was to shut the doors for foreign talent so that the local companies would be forced to recruit locally.

No doubt the H1-B cut might now see more of those few jobs being filled up by US citizens, however, by doing so the US government has also forced the industry to willingly “miss” out on the opportunity to select the best talent from across the globe. Whether or not the US industry can sustain itself without them is something only time will tell. 

RAHUL GUPTA/CNS in Mumbai