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H-1B, B-1 visa scrutiny threatens IT outsourcing providers

Stephanie Overby | Sept. 22, 2011
IT outsourcing companies are starting to feel the pinch from increased U.S. government scrutiny of H-1B and other nonimmigrant visa programs.

The B-1 visa-designed to allow foreigners to come to the U.S. for short periods of time to attend, for example, corporate conferences or to conduct contract negotiations-made headlines this year when an Infosys employee sued the Indian IT service provider for misusing the visas in order to increase its profit margins. Recently, two more Infosys workers have come forward with similar allegations.

Meanwhile, H-1B lawsuits are emerging, like one recently filed in California by IT employees alleging that their employer replaced them with H-1B workers in violation of the state's anti-discrimination laws.

The State Department has confirmed that it is considering changes to the B-1 visa program to prevent abuse. In addition, "the State Department has the option of targeting visa applications for scrutiny based on many factors, to include city, nationality, work type and firm type," says Bendor-Samuel. "They are not dependent on pending or future changes in law to employ these options."

The Department of Homeland Security says that it has increased enforcement of nonimmigrant visa regulations over the past two years.

In the short term, increased rejection rates and audits is the biggest risk for IT outsourcers reliant on nonimmigrant visas. "This can lead to long-term suspensions for habitual offenders, potentially causing significant disruptions in the availability of skilled foreign workers even without any major legislative action," says Bendor-Samuel.

New legislation or policy changes are longer-term risks, and it's not clear how those will play out. Much depends on the outcome of next year's elections, the perception of whether suppliers are policing themselves, the outcome of current civil and potential criminal cases, and the state of the economy. "Economic improvement will help remove the spotlight from this topic," says Bendor-Samuel.

In the meantime, however, outsourcing clients should be wary of public associations with visa issues. Bendor-Samuel says outsourcers could see sudden cancellations of major application development and maintenance projects or a reluctance to go public with new outsourcing deals. "One major ITO firm recently announced a $900 million IT outsourcing contract in which the client requested that its name be withheld," says Bendor-Samuel.

The report from SSA's Inspector General Office recommended that the Department of Homeland Security and SSA establish a data match agreement to reduce the number of H-1B workers who may use their social security numbers for purposes other than to work for their approved employer.

Bendor-Samuel says the IT outsourcing community should be prepared for further announcements from the U.S. State Department around policy changes or changes to definitions as they are applied to the screening and approval of visa applications. Such changes may "result in additional delays in the screening process."

For outsourcing customers, that could translate to longer transitions, reduced quality and higher fees, says Bendor-Samuel, adding that they "could face legal issues if they had reason to be aware of any visa fraud perpetrated by one of their service providers."


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