H1B visa curbs - disaster decoded'
Anticipated curbs to the H1B visa policy have been a cause of great concern across IT hubs in the country. The US draws the largest share of local IT exports and issues some 85,000 visas to Indians each year. Industry leaders are attempting to assuage the widespread unease and maintain that the curbs will have a far worse impact on the US ecosystem than that of India, still a provider of high-skilled, affordable labour to a nation that is simply not skill-ready to meet the challenges ahead. Two leading voices from the IT industry say that the downturn, if that, will only be temporary, and that the Indian IT sector will simply bounce back as it has done in the past, stronger than before.
The greatest innovation for the Global IT industry came in the early 90’s when Indian IT companies disrupted their traditional “onsite model” with an innovative and cost-effective “Global Delivery Model”. The Global delivery model was a huge disruption in a high-cost, talent-starved industry and global corporations quickly latched on to it. The Indian software export industry today is around $ 120 billion in revenues, employing more than 4 million people with a street value of half a trillion dollars.
The IT industry's success story is not a straight line. The Y2K provided a great opportunity for it to penetrate global corporations while expanding its revenue base. The dot com bubble perpetuated by the internet companies impacted its growth but lasted only for short period of time. In the meantime, US went through a couple of recessions with the 2008 financial crisis being the biggest. The industry also overcame several technological shifts by quickly adopting new technologies and retraining its work force. The Indian IT industry used every crisis as an opportunity to re-invent and re-establish itself as a formidable player in the global software space. Today, it is a mighty, dominant force in the global outsourcing industry with more than 60% market share.
The industry is facing several headwinds today, of which some are structural. The whole world is going digital at a rapid pace. Newer technologies like cloud, mobility, Artificial Intelligence, Virtual Reality, etc., are redefining how global corporates consume and spend on technologies. While the global corporations still spend a substantial amount of money on legacy software, the incremental shift in spending on new technologies is humongous. This is a structural change and the industry needs to take several steps, both internal and external, to be relevant in the new digital era.
There is also a big shift globally towards protectionism and anti-globalization. The recent elections in Brexit and US reflect those sentiments, which affect the free movement of people across geographies. In an era of high-income disparity, populist governments are focused on creating high paying jobs in their local economies even at the cost of free trade and globalization.
Without doubt, United States is the largest market for Indian IT companies. Three recent developments in that market had increased the uncertainty for Indian IT companies. One, the US Citizenship and Immigration Services (USCIS) announced stricter measures to detect and avoid visa abuse cases, which include onsite inspections without notice and providing an easier mechanism for employees to file complaints. They also issued a memorandum detailing a merit-based immigration process requiring employer to justify that the application is for specialty occupation, which is a pre-requisite for applying for H-1B visa. The onus is purely on the employer and not on USCIS. Around a dozen pieces of legislations have been introduced in congress to curb the alleged mis-use of the H-1B visa, which has bi-partisan support.
The high decibel US presidential campaign rhetoric on this matter and the fact that the new Attorney General himself is a big critic of H-1B visas adds to the uncertainty. Large customers will try to avoid being a subject matter of President Trump’s early morning tweets and could postpone their outsourcing decisions. All these could impact the velocity of business for the IT industry in India. It is not only US; countries like UK and Singapore have recently introduced similar restrictions. Not to be forgotten that UK is the second largest market for Indian IT companies.
Every crisis creates an opportunity to re-invent and succeed. The IT industry had seen several disruptive changes in the past and succeeded. There are several things they can do to come out of the current crisis.
Build a more offshore centric model - There is lack of tech talent in the US and in the last two decades the whole software ecosystem had moved to countries like India. Just like China had become the world’s manufacturing hub, India had become the global services hub for the software industry. It will be highly difficult for US to re-create such an ecosystem in the short term. Don’t forget that the unemployment rate in the technology industry in the US is one of the lowest today. Indian IT industry today works on an onsite/offshore ratio of around 30:70. With the technology and tools available today, this ratio can easily move to 10:90. Of course, it will have an impact on the top line but it will result in a healthy bottom line. Also, it will make the model much more competitive and hence could increase the volume of business to Indian companies.
Hire only global talent for global markets - Indian IT industry should hire more local talent in all the markets they operate. All this while, they had chosen the softer option - sending people from India. They should change their hiring and work culture practices to suit a global work force. Even though, they had taken several steps in the past they are still not successful in managing efficiently a global work force.
Focus on automation - Today, automation is a very big theme in the industry. With Artificial Intelligence (AI) and bots becoming more mainstream, the industry can move from being a labor intensive to more automated, tech-driven model with lesser people. Most of the services like Maintenance, BPO, etc., are prone to high levels of automation. After all, President Trump can only regulate the number of people entering US but he cannot stop the “bots” sitting in the cloud helping American corporations.
Build front end consulting and digital businesses aggressively -Today, the CIO’s of large corporations are confused with all the noise around digital and its impact on their businesses. While their current systems have lots of legacy software, they don’t want to miss the digital future. Indian companies need to build the front end consulting with industry and technology experts who can guide the CIO on disruptions in their industry while at the same time help them adopt the right digital technologies. I think, Accenture is one company, which had got this model right with a healthy mix of consulting, traditional and digital services.
The challenge for large Indian IT companies is to handle this disruption seamlessly while being in the public markets where investors are focused on quarterly growth and profits. They need to accept and acknowledge their transition from a "growth stock" to a "value stock" and return excess cash to shareholders. They need to articulate well the disruption and their strategies to mange it with resultant impact both short term and long term to all stakeholders. They need to re-purpose the work force to be more relevant in the new digital era. They need to focus more on building a global work force with high engagement levels.
Success is the biggest enemy to challenge the status quo and change. There are not many precedents for an industry to disrupt its own successful business model and emerge as winners. If Indian IT companies can pull through this disruptive change they will be a formidable force for many years to come. Looking at their track record there is a high degree of probability that they will succeed.
10 things you didn’t know about the h1b visa
U.S authorities have tightened the norms for hiring computer programmers, putting a squeeze on Indian IT companies over the issue of H-1B visas. The Trump administration has issued a stern warning to American firms as they began applying for skilled-worker visas on Monday. Indian IT workers typically snag more than 50 percent of the H-1B visas that are up for grabs, with petitions usually outnumbering the quota available.
1. H-1B is a non-immigrant visa that allows employers based in the United States to employ foreign workers. This is valid initially for three years and can later be extended up to six. For such a visa, the company concerned must offer a job to an employee and then apply for the H1B visa with the US Immigration Department.
2. Every year, on April 1, US immigration authorities open a fresh cap for H-1B visa applications. Applicants can legally apply for an H-1B visa on the first weekday in April. Allotment is done on a lottery basis.
3. Applications for this year’s batch of visas opened on April 3, with quotas and allocations for the controversial program essentially unchanged.
4. The US has an annual cap of 85,000 for H-1B visas, including 20,000 for foreign workers with advanced degrees from the US.
5. The H-1B visa application fee, originally, was $325. Another $500 was added as Prevention and Detection Fee and $1,500 per visa application as Employer Sponsorship fee for employers with 26 or more employees.
6. In 2016, there were 236,000 applications for just 65,000 available visas.
7. Although there is no allotment quota for any country, however, a total of 6,800 are usually set aside for Singapore and Chile citizens in keeping with their free trade agreement.
8. Indian IT companies like HCL, TCS, Infosys, Wipro, Cognizant, and L&T Infotech are among the major users of H-1B visas. Big US employers of H-1B include Microsoft, Google, Amazon, IBM, Accenture, Syntel, Apple, etc.
9. The changed visa norms will impact the Indian IT companies in general and computer programmers in particular. The latter will feel the heat first as merely obtaining a computer degree may not be enough to get an H-1B visa.
10. Spouses of US immigrants on H-1B visas could lose their right to work. As per norms, H-1B visa holders can bring immediate spouse and children under 21 to the United States under the H-4 visa category as dependents. This move will affect thousands of Indians who are living there in the US on H-4 visa. Almost 72 percent of all the H1B visas issued by the US worldwide went to Indians. A group called Save Jobs USA filed a lawsuit, which is in a federal appeals court, the Department of Homeland Security’s did not have the authority to create a new employment visa category.
The writer is former CFO, Infosys