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H-1B Visa

The Talent Crunch that just Brought Home IT’s Perils in Trump’s America | In the News

By | In The News

Indian IT companies and their customers are facing a dearth of mid-level talent in the US, caused by stricter interpretations of rules governing the H-1B work visa programme.

The US market has always had a problem with entry-level talent but the middle layer was generally filled with Indians on H-1B visas. But as the US government and the Department of Labour have made it significantly harder to get an H-1B visa or have it extended, previously a routine task.

IT consultants said they were seeing a shift to third-party players, even as clients continued to work on the captive plans.

“It is clear that clients are running out of talent in the US market and that this is partly creating more demand for third-party services. It does take time to both expand and start new captives and they may be shifting temporarily some of their plans to third parties while they make the investment to expand/start captives,” said Peter Bendor-Samuel, CEO of IT consultancy Everest Research.

Read more in The Economic Times

Trump’s Planned H-1B Changes Stall as Offshoring Continues | In the News

By | In The News

For IT professionals, there’s no evidence that President Donald Trump is reducing the risk that their job might go offshore.

Offshore outsourcing firms, who are the largest users of H-1B visas, often use visa workers to facilitate the transfer of work. The Trump administration has criticized the visa program for this reason. Analysts have long argued that increasing visa wages, and changing the way visas are distributed, may hurt the ability IT services firms to use visa workers in offshoring.

But the administration, as well as Congress, have not taken any major actions on the visa program.  The offshore outsourcing industry is breathing easier, but it is still seeing changes.

The rate of growth among the largest India IT services firms has been consistently declining for the last eight quarters, according to Jimit Arora, who leads Everest Group’s IT Services research practice.

Read more in IEEE-USA

Are Offshore-heritage Service Providers “H-1B Visa Abusers” or “Sitting Ducks”? | Sherpas in Blue Shirts

By | Blog, Outsourcing, Shared Services/Global In-house Centers

Recently, an official from the Trump administration accused Indian IT providers of abusing the H-1B visa process by “flooding” the lottery system with applications, giving them an unfair lottery draw advantage. The statement again spotlighted the issue of importing foreign IT services workers to the U.S., thereby limiting job opportunities for domestic candidates. It also underscored the huge extent of outsourcing being done by U.S. corporations, especially to offshore-heritage providers. What it didn’t discuss was other types of companies’ usage of the H-1B program to import skilled talent into the country.

Everest Group conducted a quick analysis on the Labor Condition Applications (LCAs) employers filed to obtain H-1B visas in the last few years. We classified the employers into several categories:

  • Offshore-heritage service providers, such as Cognizant, Infosys, and TCS
  • Multinational service providers, such as Accenture, Capgemini, and IBM
  • Professional services firms, such as Deloitte, EY, and PwC
  • Product companies, such as Apple, Cisco, and Oracle
  • All other companies

Our findings?

  • While the total number of certified positions increased at a CAGR of 11 percent between FY 2011 and FY 2016, offshore-heritage providers’ share has dropped significantly, from 74 percent in FY 2011 to 40 percent in FY 2016
  • The biggest share grabbers are professional services firms, which are increasingly competing with traditional IT services players across deals. Their share in H1-B visas has increased from 7 percent in FY 2011 to 37 percent in FY 2016. On an absolute basis, that’s an almost ten-fold increase
  • The top 25 employers contribute ~50 percent to the total positions certified, which implies that offshore-heritage providers have only a 20 percent share of the total positions certified for H-1B visas by the Department of Labor between FY 2011 and FY 2016.

(For the uninitiated, a certified LCA (ETA Form 9035), is a prerequisite to H-1B approval. The LCA must be certified by the Department of Labor (DOL) before the H-1B petition (Form I-129) is submitted to USCIS. The LCA contains basic wage and location information about the proposed H1B employment. Please note that a certified LCA does not guarantee H-1B visa approval, however, certified position trends are good indicators of H-1B visa usage. Also, note that the data below includes positions certified for new H-1B visa applications as well as renewal and transfer of H-1B visa.)

H-1B visa and offshore service providers

One of the Trump administration’s suggested reforms is to increase the minimum wage for H-1B visas from US$60,000 to US$130,000. But as this minimum wage recommendation is applicable to companies that are “H-1B dependent” – and most offshore-heritage providers fall into this category – the required increase in minimum wage, whatever it ultimately is, will likely affect offshore-heritage providers more than any other type of organization.

At the same time professional services firms have quietly increased their leverage of the visa-led model, offshore-heritage providers have been the unfortunate recipients of far greater scrutiny and negative limelight. In order to successfully compete, offshore-heritage providers have no choice other than to prepare now for the impact of visa policy changes. As the old saying goes, “better safe than sorry.”

CBS Misses The Mark On American Job Loss And H-1B Visa Issues | Sherpas in Blue Shirts

By | Blog, Outsourcing

A segment of the March 19 CBS “60 Minutes” TV show reported on the H-1B visa program. The show shed light on the pain and suffering of Americans losing their jobs to foreign low-wage workers and the indignity in the way it happens. Interviewees pointed out that companies exploit the H-1B visa program as a strategy for acquiring cheaper labor rather than higher talent skills – and that’s absolutely true. The show focused the spotlight on American companies “hijacking” the H-1B visa program, using it in a way that was not intended when the legislation was written. The segment ended with an interviewee’s doomsday-type projection that American job loss to companies in India won’t end. That’s where I believe CBS and “60 Minutes” missed the mark – there is absolutely a pathway out of this situation, and many American companies started on that path over a year ago. Read more at Peter’s Forbes blog.

Are Rising Costs the Only Impact Immigration Reform Bills Will Have on the Services Industry? | Sherpas in Blue Shirts

By | Blog, Outsourcing

When U.S. congressmen Darrel Issa and Scott Peters at the very beginning of 2017 proposed a bill that would increase H-1B visa holders’ wages to US$100,000, experts in the industry were positive that IT service providers would be able to manage it, as they were already bearing costs between US$75-85K. But less than a month later, U.S. Congressman Zoe Lofgren’s introduction of the “The High-Skilled Integrity and Fairness Act of 2017” – a bill that aims to double the minimum salaries for H-1B visa holders to minimum US$130,000 – eroded 5 percent of the Indian IT service providers’ market.

Although U.S. President Trump’s subsequent congressional speech talked about merit being the criteria for visa allotment – and many businesses rejoiced that he made no mention of minimum wage as the deciding factor – it’s fair to assume that the minimum wage might still end up near US$130,000 in a merit-based lottery system.

But cost is only one of the possible impacts of visa reforms on the parties directly and indirectly involved in the services industry. Let’s take a look.

Impacts on service providers

A landed resource might continue to be indispensable for projects when his or her role is primarily that of liaison with between the client’s business units and the provider’s offshore resources (due to time zone differences and established comfort levels) or if he or she was engaged for unique skills or insights. Landed resources serving as liaisons for business units could more easily be replaced by local resources.

H-1B visa reforms are expected to trigger a refocus on driving efficiencies through automation and digital process transformation. This will accelerate the transformation in service providers’ years’ standing talent acquisition operations and processes. The requirement for different skill sets, coupled with cannibalization of traditional revenue streams, paint a less than rosy picture on falling traditional revenues and increasing costs.

We might also see higher consolidation in the outsourcing industry, especially for mid-sized firms, as service providers may look at economies of scale and inorganic account expansion to counter slowing growth and keep cost of operations in check.

Impact on enterprises

U.S. companies might have to bear the brunt economic impact of the demand-supply mismatch. Enterprises today use H-1B resources for a variety of reasons, some to manage their GIC operations. A raise in the average wage will cause inflationary pressure on IT resource costs, restrict supply of talent, and create increased poaching of resources between companies. In other words, enterprises might be forced to hire landed resources at a cost much higher than the perceived value, or lose out on business efficiency and growth, thus creating a vicious cycle that the current administration hopes to break.

Impact on the education sector

The education sector might be most immediately impacted by any stringent visa reform going through. Enrollment of non-U.S. nationals in Master’s programs could plummet, given the likely challenge in finding jobs after graduation. This situation has already been observed in the U.K., where tight visa guidelines have compelled students to return home once they are done with their education. The rest of Europe, which has relatively less stringent visa requirements, might become a hot destination for the Indian student diaspora as demand for technical expertise increases significantly.

In India, it’s clear industry veterans and current leaders are questioning their own hiring tactics and the sustainability of the low cost model. While some have expressed that retraining their current force is difficult as people in senior and middle management are low quality, others have condemned the IT industry as a whole by accusing them of carteling to keep wages low.
This might not float well with new graduates, who increasingly look for jobs at start-ups entering the disruptive digital space. These new companies are offering higher wages and a culture more suited to millennials than do IT service providers.

While it will be wait and watch until we know what clauses in the proposed bill become law, it’s clear that any combination of the above and other impacts will force providers and enterprises to make some major decisions to remain at the top of their game.