The Visa effect

| Updated on January 20, 2018 Published on April 03, 2016



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The US recently doubled the visa fees for H-1B and L-1 visas. How will the IT sector take it? Meera Siva talks with IT professionals to get their views

‘Political uncertainty is a real concern’

Sudheer Kumar, who runs the global operations at a software services firm in Bengaluru, says the visa fee hike is a bother but the current political uncertainly in this regard in the US is the real concern.

His four year-old company, which offers consulting services in ERP, mobility and analytics software solutions, is 300-strong, with operations mainly in India and Germany. “We registered in the US to kick-start our operations last November. Now, we feel the visa hike and the general political sentiment may not be very favourable to expand there. Given that the hefty hike hits our bottomline, focussing on Europe may be more prudent right now,” he says.

Kumar believes that other small and medium firms may feel the same. “At the senior level, they understand that things may not go smooth when shifting to the US,” he explains. But junior and mid-level employees continue to aspire for US postings. “There is a lot of peer pressure which leads to aspirations about a US posting,” he observes. He says that the learning from the job, in-depth technical exposure and training are better in India compared to the US, but that does not cool their desire to go to the US.

Another reason may be the employee-friendly nature of US visa. “In many European and West Asian countries, employees who are on a visa cannot quit without the knowledge and consent of the current employer. It is not so in the US. For a small firm sending someone on a visa, losing them in a few months adds to substantial cost and the high fee may not be recoverable,” he says.

Still, given the economic slowdown in the Gulf countries and language issues in Europe, the US is certainly attractive. The country’s economy is reviving and employees have a keen interest to go to the US. So, Kumar has the US firmly on his expansion radar. “We will push forward once there is political clarity in the next few months,” he states.

‘More work for Indians’

Vineel Nalla, founder of a technology firm in Hyderabad, feels that in the short term, the visa fee hike is bad for companies in India as well as in the US. “Certainly IT companies will see their costs increase. And if they reduce the number of employees they send to the US due to the higher upfront costs, employees may not be happy with the reduced opportunities,” he says. In the US, too, companies will prefer to have people on-site as they find it more productive. Having fewer people for on-site work can turn out to be a cause for concern for firms in the US, he feels.

But Vineel feels the situation can also turn out to be beneficial for the IT industry in India over the medium to long term. “There is always a shortage of talented workforce in the US. If Indian IT companies hesitate to send their employees out of the country, it could mean more work sent offshore to India,” he predicts.

He also notes that in the past, BPO, maintenance and back-end work were mainly outsourced to India. Of late, a lot of interesting work, in the areas of product development and research, is also happening in India. “We have a lot of talent in traditional software development as well as growing expertise in new fields, such as data science, where there is a shortage of talent globally,” he says. These factors will make India a good place for offshore development over the long term.

Does he think the shift he anticipates may lead to concerns over intellectual property? “Many small US firms are opting to set up their own companies here and hire locally in India. Bigger ones have figured out how to protect their intellectual property, by and large,” he says. Hence, instead of taking people to the US, getting the work done here may be a viable alternative for US clients.

‘Small, mid-sized firms may be hit’

Saikumar Nagarajan, a business consultant for the manufacturing and logistics segments, has eight years of software industry experience. He feels more noise is being made about the visa fee hike than may be warranted. “For large IT companies, the higher visa fee may only be a hit of 3 bps to profits and that is not much,” he notes.

Qualitative shifts that started a few years ago in the industry also point to the fee hike having only a minor impact. “Indian IT companies were probably seen primarily as body shops in the past; but the larger ones have developed capabilities for higher value-added services over the years,” he says.

“For example, Indian IT professionals may have had to spend a lot of time at the client location to understand the business process first and the client-specific customisations needed. This meant significant presence at the client site,” he says. But now, thanks to a lot of exposure, the 80 per cent of the time spent in learning the common process is not needed, reducing time and personnel needs. Companies have been taking up digital transformation projects which are large turnkey solutions for end-to-end process changes. These higher-value services offer possibilities for premium pricing and development in India.

Also, with lower hiring needs and higher pricing — with outcome-based and other non-linear pricing models — Indian IT companies may also consider local hiring options.

“Canada is a choice some service providers consider when they work with US clients in the mid-west or in the north-west,” he says.

While he feels the impact of the hike would have been more severe if it had happened eight to 10 years ago, he thinks small and mid-sized service providers may still feel the pinch. “Many join IT firms and work for low pay as they hope to be placed in the US. These expectations may need to get readjusted,” he says. But, he believes changes in young employee attitude are already afoot. “Rather than wanting to earn quick bucks in dollars and settle down, there is a desire to do exciting work in start-ups here in India,” he notes.

The hiring emphasis of companies, especially the larger ones, is also changing — from focus on numbers to emphasis on right skills. “Software testing, for instance, requires a lot of resources and companies have started using tools to automate this process and re-skill the existing workforce to deliver higher value,” he says.

‘A lot more local talent in the US’

Vidyasagar Ganesan, a hardware professional with over 18 years of experience, lives in the US. His view, from the other side of the globe, is that the workforce demographic shift and broader industry changes make the visa fee hike issue pale in comparison with the larger tectonic shifts.

“During the 1990s, many professionals from Asia went to the US either as students or on a work visa and settled there. Now, their children are young graduates and many of them are engineers. Importantly, there was a lot of emphasis placed on Science, Technology, Engineering and Mathematics, known as STEM education. This is also paying off and there is a lot more local talent available now,” he details.

He says companies hesitate to hire foreign students who come to study and start working as getting a work visa is not assured, given the low quota and the lottery system. “The normal time-tested routes to immigrate to the US are not readily available anymore,” he observes. The hardware industry has shrunk in size and there is a lot of consolidation. “So, companies in Silicon Valley are finding that they can avoid all the hassles of the visa process and just hire locally,” he says.

The economics of hiring foreign workers is nowhere as favourable as it used to be.

Published on April 03, 2016
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