To H-1B or not to H-1B - CEO outsourcing perspectives from India and the US
- Summary:
- The fate of the H-1B visa scheme is up in the air following Trump's immigration and travel ban. That has different implications for US outsourcing firms compared to their Indian counterparts as two CEO perspectives illustrate.
Since the election of US President Donald Trump, there’s been a lot of debate around the future - or fate? - of the H-1B visa.
Every year, the US Citizenship and Immigration Services (USCIS) issues around 85,000 H-1B visas, most of which are taken up by employees of major Indian tech firms. offshore outsourcing firms receive half of the H-1B visas. (Denis Pombriant’s excellent historical context article can be read here.) USCIS received 233,000 petitions for the H-1B Visa FY 2016 quota.
During his campaign, Trump made no secret of his contempt for the visa scheme, proclaiming it to be a “cheap labor program” that takes jobs from Americans:
I will end forever the use of the H-1B as a cheap labor program, and institute an absolute requirement to hire American workers for every visa and immigration program. No exceptions.
Less than a month into his Presidency, immigration has become a hugely contentious issue following the signing of an Executive Order to ban travel from seven Muslim-majority countries (although not ones in which the Trump empire has business interests).
The resulting firestorm of protest and the intervention of the judiciary to suspend the President’s ban is only likely to stiffen Trump’s resolve to follow through on further immigration action and that may well mean a rumoured H-1B overhaul is on the cards.
Certainly Patrick Heffernan, Practice Manager & Principal Analyst at Technology Business Research (TBRI) sees not reason, based on the first two weeks in office of the new regime, to assume that there won’t be a reduction in the number of visas doled out each year. In a research briefing - Automation, not policy, will kill H-1B visas - he argues that there are wider issues that will impact on the services industry as a whole:
Overall, the entire IT services market continues to buckle under pressure from emerging technologies and changing client demands. For example, new software delivery models demand vendors such as Infosys, TCS and Wipro find professionals who can work with and nurture relationships beyond the traditional IT buyer. IT services vendors must expand on-site and/or nearshore talent bases to support emerging technologies, from prototyping and agile development to delivery. As a result, IT services vendors will have to draw from onshore resources, further eroding the need for H-1B visas while forcing TCS and peers to compete with IBM, Accenture and others for local U.S. talent.
While expected H-1B visa policy changes are likely to impact India-centric vendors, they will ultimately see margins decline if they are unable to tap into automation more rapidly….A larger question for India-centric IT services vendors is not how they will deal with fewer or no H-1B visas, but how they will deal with the changing landscape in delivering outsourced IT services.
US view
As part of a wider thesis, it’s an interesting point of view. It’s noticeable that there’s a marked difference between the views expressed of late of US and North American outsourcing giants and their Indian counterparts.
For example, CSC CEO Mike Lawrie seems positively blasé about the impact - or lack thereof - of any changes to H-1B:
We've got roughly 22,000 employees in the US. About half of them are in other locations, in other words outside of the US, so, that leaves us with about 11,000 employees on shore, if you will, in the US. Last year, we were granted a little over 500 H1B visas, and we're applying for I think 700 or 800 next year. So, this is just not an impact at all to our business going forward.
The argument made by proponents of schemes like H-1B is that they are necessary in order to be able to source talent and skills that are not readily available in the US. Rather than taking away American jobs, the roles that are impacted are those that aren’t easily filled from the domestic skills base.
Lawrie reckons that it was ever thus:
There has always been a shortage of highly skilled, IT skills in the marketplace and that trend continues. In other words, we could use more IT skills, particularly next generation skills. So, cloud skills and Amazon Web Service skills and cybersecurity skills are very, very tight.
He argues that CSC is taking its own action to encourage the growth of ‘in-country’ skills, skills that might, in their own right, further reduce what dependency CSC does have on H-1B:
This is part of an overall global workforce management program that we have in place. It includes a lot of things. It includes incentives for certain things or for a certain skills in certain areas. It includes working with universities and other partners to resource some of the skills, including retraining of many of the people that we currently have in the company. So, it's a combination of different actions within the overall global workforce management process that we have in place.
India view
On the other hand, the likes of Infosys CEO Vishal Sikka are left playing a waiting game to see what emerges from the Whitehouse in the days and weeks to come:
In the absence of visibility on the outcome and the timelines involved in any visa reform, it is difficult to assess the impact of such possible developments on our business.
But Sikka acknowledges that there are clearly potential problems:
Depending on the nature of the policy that is adopted that there could be impact to the work that we do. While we don’t know what kind of policies will be going into effect, we are preparing to address different scenarios based on what might happen.
There needs to be more local hiring to shore up the firm’s operations, he says, noting that he was himself a “high level US local hire” two-and-a-half years ago:
The more that we can bring local talent to work closely with clients, bring the contextual sense of innovation to their work, and bolster that with deep global expertise coming in from the outside the better. We are deeply committed to the US economy growth in there and so forth.
Depending on the nature of the policy that is adopted, we will take the necessary measures and that might have some impact in the near term, which we will see depending on the nature of the policy. But ultimately, the solution here is better local hiring, more strength in the local economies and local markets. And there is strong long-term focus on innovation and software-led the delivery of value.
So the Infosys strategy is built around hiring local and supplementary skills, which are not available through the visa program anyway, as well as sourcing talent locally, both in terms of experienced hires as well as people straight out of college. All of that was happening anyway, but it’s now more important than ever
The flip side of the coin is that if H-1B is revoked or revolutionised in order to Make America Great Again, there is also an impact on the Indian economy and IT industry. Sikka observes that India will need to focus on its own start-up growth:
As I look back on the evolution of the IT services industry over the last 15-20 years, it has been a great driver of job growth in India. A lot of that has happened because of jobs that are increasingly mechanisable, that are increasingly susceptible to automation. These are the kinds of jobs that have moved [to the US]. Today the IT services industry employ something 3.6 million, 3.7 million people, but the large number of these are working in jobs that are more prone to automation.
So, these jobs are going to, over time, go away. Therefore the long-term future of the Indian employment scene and the Indian hi-tech scene has to be in a combination of automation and innovation. It has to be in entrepreneurships. So I think the more that we encourage entrepreneurship within our companies, as well as within the start-ups, the better.
My take
The outrage demonstrated by Trump via Twitter - what else? - at being defied by the courts can only mean that he and his administration will double-down on immigration reform and that will take in H-1B at some point.
In my personal opinion, Infosys’s thinking on this issue right now seems pragmatic, while CSC’s edges perilously close to an ‘I’m alright Jack’ mindset - which won’t do any harm for a company that has such a large stake in the US government market, but doesn’t suggest there would be much resistance to H-1B reform from that quarter. Maybe I’m wrong. We'll see.
Sitting on the President’s business advisory team is Ginny Rometty, CEO of IBM, a company that was the third largest H-1B sponsor in 2016. It is to be hoped that Ms Rometty thinks very hard about what advice she’s going to pitch to Trump on this issue.
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