H1-B visa curbs: disaster de‘coded’

Anticipated curbs to the H1-B 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 th

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 antiglobalization. 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 H1-B 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 H1-B 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 H1-B 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.

The H1-B visa programme should help US companies recruit highly skilled foreign nationals when there is a shortage of qualified workers in the country. Yet, too many American workers who are as qualified, willing, and deserving to work in these fields have been ignored or unfairly disadvantaged — Department of Homeland Security, USA

There is a lack of tech talent in the US and in the last two decades the whole software ecosystem had moved to countries like India. It will be highly difficult for US to re-create such an ecosystem in the short term.

There are some reservations regarding the impact of the policy restrictions but we aren't sure how strict the legislation will be. If the fears of industry leaders are met, then there will be a huge loss for the US ecosystem. They simply won't find such high-end skills at such affordable prices. The bigger impact will take place there. It will also affect other business plans as these are based on certain assumptions. The service sector in India, however, will be largely unaffected by these curbs at least in terms of meeting commitments from domestic shores. And the US is simply not skillready to meet the changes ahead as they have grown accustomed to years of importing skilled labour PRIYANK KHARGE Karnataka minister for IT

There has been much talk of the H1-B visa curbs, although nothing has actually happened! There are fears that restrictions might be imposed but my position has always been that even if they do constrain it, the impact will be more on the US economy than ours. We will find a way around it, as we have done in the past. Unemployment in the US is at its lowest and there’s even less of it in their IT industry. IT now drives every US industry, from healthcare and e-commerce to retail and edutech. They need all the skills they can get and overall, the Indians who go there are multipliers of the US economy. ASHOK SOOTA Executive Chairman, Happiest Minds