Potential Impact of H-1B Visa Reforms on IT Sector

potential impact h1b visa reforms sectorImmigration has been a controversial topic in the run-up to and after the inauguration of new U.S. President Donald Trump. With his plans to construct a wall across the Mexican border and a U.S. entry travel ban on those from mainly Muslim countries – a ban which has since been overruled by a County Court judge – the IT outsourcing industry is preparing for information on future plans he might have regarding changes to the H-1B visa programme. During his campaign trail, Trump severely criticised U.S. jobs being moved overseas and urged that the minimum wage threshold for H-1B holders should be increased from the present $60,000 per annum to $100,000.

A recently published draft of an executive order called for an enquiry into the effect  non-immigrant visa programmes have on American workers and for  the Department of Homeland Security to “consider ways to make the process for allocating H-1B visas more efficient and ensure that beneficiaries of the programme are the best and the brightest.” U.S. Senators Chuck Grassley (R-Iowa) and Sen. Dick Durbin (D-III) recently announced a new bill that forbids American workers being substituted by visa holders and that foreign graduates of U.S. schools are given priority in obtaining H-1Bs. Leading IT outsourcing providers in India are fully aware of and prepared for the unpredictability surrounding any changes to the H-1B programme, which they utilise when transferring workers to clients in the U.S.  According to Natarajan Chandrasekaran, the CEO of India’s largest IT services firm, Tata Consultancy Services, more than a year ago the company began adopting certain measures that will facilitate its operations in a “visa-constrained regime”. In 2015 the company had requested 14,000 visas, but in 2016 this dropped to only 2,000.

Infosys CEO Vishal Sikka, a U.S. citizen, also accepted the possibility of H1-B programme changes but said they were not unduly worried as the company had already increased local hiring, an area of their operations that has received attention  from the very beginning. Sikka added that they are committed to creating U.S. jobs and the same scenario applies to Europe, Australia and other countries in which they are based. Similar views were expressed by the CEO of HCL Technologies C. Vijayakumar who revealed that in order to support future growth, the company is already boosting their numbers in campus and entry-level hiring in the U.S. Potential changes to U.S. visas for temporary workers is not the only challenge the Indian IT industry has to confront, according to Abidali Z. Neemuchwala, CEO of Wipro. Cloud computing options, greater automation, plus fierce competition is unsettling the offshore IT services market. Vice-Chairman Vineet Nayyar of Tech Mahindra said that the most significant challenge for outsourcing providers would be adjusting to automation rather than coping with the new political administration of America. However, both executives expressed confidence in the Indian IT services industry being resilient enough to confront any impending changes.

New H-1B rules that could include caps, restrictions or higher fees are likely to negatively affect labour costs for IT service providers. If the Senate bill suggested by Durbin and Grassley becomes the basis on which visa amendments are executed,   financial projections by the Everest Group estimate that businesses that rely on the H-1B could see their onshore costs shoot up by as much as 20 per cent. Peter Bendor-Samuel, CEO of the Everest Group said that “The net effect of these changes will not dramatically change the offshoring equation. However, they will further level the playing field between Indian heritage and U.S-based multinational providers.” Additionally, it will be necessary for Indian service providers to increase the rate at which they adopt robotic process automation, DevOps and other evolving technologies, in the hope that the efficiency gained from investments in productivity will counteract the higher outlay.