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IT firms face visa double whammy

August 28, 2010 03:37 IST

Soon after Washington's decision to nearly double visa application fees as a part of its border security law, a bigger storm in the form of the Comprehensive Immigration Reforms Bill is gaining momentum in the US.

It is expected to hit the Indian IT outsourcing industry in November, with potentially disastrous consequences.

Talk of comprehensive immigration legislation has been in the air for some time. It took a backseat for some time due to Congressional elections in the US, but the debate is expected to intensify in November once those elections are over.

The bill, which aims to curb illegal immigrants to the US from Mexico, also proposes to axe visas (whether H1-B or L1) to foreign companies that do not employ at least 50 per cent local people in the US. If passed, the bill is expected to snap the spine of the Indian IT outsourcing sector, which is nowhere near this 50 per cent figure and still relies on H1-B and L1 visas to transition clients' contracts offshore.

"Most politicians are trying to capitalise on the issue on the back of rising unemployment and a lot of negative sentiment floating around that," said a senior executive of one top Indian IT outsourcing firm. He did not wish to be named, as his company has significant business interests in the US.

Indian IT service companies depend heavily on H-1 and L-1 visas to send engineers from India on a temporary basis to transition clients' work to India: gathering client business requirements, getting the design ready; and sometimes to support a client's IT infrastructure maintenance works onsite.

Most companies also send Indians for various front-end roles like account management, relationship management and sales & support.

"One may manage the migration by using new tools and technologies like collaborative platforms or video conferencing. But the front-end roles mostly manned by Indians, which is a strength of most Indian companies, could be depleted," said Amneet Singh, VP-global sourcing, Everest Group.

Besides, most IT employees in India consider onsite (US) postings a prime motivation factor to further their career growth. If that disappears, most companies will find it difficult to get talent. "In some way, this could disturb the whole career management framework."

"If people can't travel to the US, the whole delivery model could break down and performing the work offshore will be quite difficult," Singh added.

Nasscom, the apex industry body representing the software services industry in India, has been asking US authorities and lawmakers to introduce temporary service visas or work permits similar to those of the UK, Germany and France. It made this clear in 2009 when senators Chuck Grassley and Dick Durbin were planning to introduce the Visa Reforms Bill in the US Senate.

A major part of the Durbin-Grassely proposals are now believed to have been incorporated in the Comprehensive Immigration Reforms Bill. Nasscom is awaiting an official draft of the Bill before renewing its campaign against the move.

"There is no official draft available at the moment, which is why there are many versions floating around. There are discussions between the US administration and Congress on a 10-point agenda on the shape of the Bill. Of course, while they are largely talking about Mexican immigration issues, we believe H1 and L1 are also part of the discussion," said Nasscom President Som Mittal.

Industry insiders say the recent spurt in anti-outsourcing initiatives in the US are due to political reasons. The US economy is also passing through a rough patch, with talk of double-dip recession growing louder with each passing day. Unemployment rates are high and private indebtedness is very high.

"All recent data from the US is very negative. US companies are sitting on $2 trillion in cash, one of the highest seen in the past few decades. But they are not investing the money because of a lack of confidence. Consumer spending has fallen, while the savings rate is slowly rising," said V Balakrishnan, CFO of Infosys Technologies.

Since the fiscal deficit is going up, most new US government programmes are self-funded, otherwise it would be difficult to get Congressional approval. "Public opinion in the US is that the fiscal deficit should not go up, which means any programme should be self-funded. When they thought of the Border Security Bill, they have to spend a certain amount, a part of which they wanted to collect by increasing the visa application fee," added Balakrishnan.

Bibhu Ranjan Mishra in Bengaluru