H-1B or Not to Be

One chal­lenge for In­dian IT ser­vices is from an in­creas­ingly pro­tec­tion­ist United States

The Economic Times - - Deep Dive - Shel­ley Singh

Near­ly4mil­lion.That’sthe­size­ofthe­work­forceded­i­cat­ed­toabusi­nessthat’sthrived for the past three decades on a growth model of labour ar­bi­trage. In the process, it’s ma­tured into a in­dus­try worth al­most $150 bil­lion. The multi-bil­lion dol­lar ques­tion to­day is, where does it go from here, as it comes head to head with a se­ries of chal­lenges. Con­sider: New Bills be­ing in­tro­duced by the Trump ad­min­is­tra­tion in the US Congress seek to make out­sourc­ing not only tougher but more ex­pen­sive. This comes at a time when pro­tec­tion­ist sen­ti­ments that call for on­site hir­ing of lo­cals are spread­ing glob­ally.

All this, even as tra­di­tional IT ser­vices are mov­ing to­wards the dig­i­tal econ­omy. Only around 10% of the In­dian soft­ware work­force is ready to take on dig­i­tal tasks like ma­chine learn­ing soft­ware, data an­a­lyt­ics and ar­ti­fi­cial in­tel­li­gence. And just about 2,50,000 are for­eign na­tion­als, nearly half of whom work in In­dia rather than on­site. Ros­tow Ra­vanan, CEO of mid-tier IT ser­vices firm Mindtree, says, “Im­mi­gra­tion pres­sures come and go while the reg­u­la­tory stance keeps chang­ing. More wor­ri­some is a short­age of pro­gram man­age­ment skills, ar­chi­tec­ture and de­sign skills.”

While ac­quir­ing skills is im­por­tant to be able to de­liver dig­i­tal work, in the im­me­di­ate term, lo­cal hir­ing could be a big­ger con­cern, par­tic­u­larly in the US, the largest mar­ket for In­dian IT. Mindtree em­ploys 16,100 peo­ple of 55 na­tion­al­i­ties and In­fosys has 129 na­tion­al­i­ties among its nearly 2 lakh-strong work­force (as of De­cem­ber 2016).

Lo­cal sourc­ing rhetoric has come and gone but this time, ris­ing un­em­ploy­ment and a tighter visa regime — that in­cludes a pro­posal to more than dou­ble H-1B visa wages to $130,000 — could play spoil­sport. H-1B is a non-im­mi­grant visa that al­lows Amer­i­can com­pa­nies to tem­po­rar­ily em­ploy for­eign work­ers in spe­cialty oc­cu­pa­tions.

Sarab­jit K Nan­gra, vice-president, re­search, IT, An­gel Broking, says, “If pro­tec­tion­ist poli- cies con­tinue be­yond rhetoric and spe­cific curbs are erected, there could be a 30-40% hit on net profit.” For ex­am­ple, a hike in the H-1B min­i­mum wage to $130,000 could add $3.5-4 bil­lion to the tech in­dus­try’s wage bill (that’s ad­di­tional costs cal­cu­lated for 55,900 H-1B ap­pli­cants spon­sored last year), shav­ing off a sig­nif­i­cant part of its annual op­er­at­ing profit.

Arup Roy, re­search direc­tor at tech re­search firm Gart­ner, sees a po­ten­tial back­lash to US President Don­ald Trump’s pro­tec­tion­ist poli­cies against for­eign tech­nol­ogy and high-skilled work­ers. “For tier II com­pa­nies, the short-term blow could be harder as they don’t have much on­site re­sources and bank on labour ar­bi­trage to sell ser­vices. There could be a back­lash in the next 1824 months as com­pa­nies will have to tap into glob­ally avail­able skills.” In­dus­try­bodyNass­com r e ckon s a de­mand­sup­ply gap of as high as 80 mil­lion over the next decade for dig­i­tal skills. R Cha nd r a shek h a r, president, Nass­com, says, “Un­filled jobs in the US will be 2.4 mil­lion by 2018. Visa curbs will hurt them more in the long run.” Nass­com says the pool of en­gi­neers with dig­i­tal skills (ar­ti­fi­cial in­tel­li­gence, data an­a­lyt­ics, ma­chine learn­ing) grew eight­fold in the last few years. “Given the short­age of dig­i­tal skills, In­dia should be in a strong po­si­tion,” adds Chan­drashekhar.

So far, com­pa­nies have been re­luc­tant to out­source dig­i­tal tasks as they are core to their busi­nesses. How­ever, as busi­ness ex­pands, they could look at part­ners. Ra­vanan of Mindtree says, “To­day, com­pa­nies like Google work with mul­ti­ple part­ners. Busi­nesses like Uber, What­sApp, Airbnb took less than five years to scale to 100 mil­lion users, un­like in­dus­tries be­fore them. Tech­nol­ogy has been a big part of the change.” He sees out­sourc­ing by dig­i­tal com­pa­nies in­creas­ing, lead­ing to de­mand for such ex­perts.

Lo­cal sourc­ing rhetoric has of­ten come and gone but this time, ris­ing un­em­ploy­ment and a tighter visa regime could play spoil­sport

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