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Immigration reform bill takes aim at Indian IT outsourcing companies

Stephanie Overby | May 27, 2013
India's application development and maintenance business will take a hit if a provision of the U.S. Senate immigration bill becomes law, and some experts say the restrictions will drive more outsourcing offshore.

If Indian providers were forced to hire American-born employees to work at client sites, it could also slow their growth as they try to make those staffing shifts.

"They've not got a good record of being able to hire U.S. nationals, although certain firms have done better than others," says Bendor-Samuel. "They are Indian firms run by Indians in India. They're very good organizations, but their culture is just not as attractive to U.S. citizens."

Restrictions on L-1 visa placement also made it through committee. Employers with 15 percent or more of their U.S. workforce in L-1 status would be prohibited from outsourcing those workers.

Those with less than 15 percent L-1s on staff would have to pay a $500 fee and get its customer to attest to not laying off its American workers for 90 days before and after the L-1 placement. The bill would also grant the Department of Homeland Security new powers to investigate L-1 compliance.

The Senate bill also imposes $5,000 filing fees for employers with 30 percent or more of their U.S. workforce in H-1B or L-1 status. And companies would be banned from employing more than 75 percent of their workers in 2015, 65 percent in 2016, and 50 percent in 2017 and beyond.

A Win for U.S Tech Companies?
"Quite frankly, the U.S. companies get everything they wanted—more visas and a larger share of the visas," says Bendor-Samuel. And, adds Virtue, "as is true under current law, such companies need not attest to the fact that they have not laid off workers in the last 90 days in order to secure an H-1B visa."

Offshore outsourcing customers, however, aren't rallying to the support of their Indian vendors. "They're not particularly concerned," says Bendor-Sameul, who says Indian outsourcers are unlikely to pass on their margin losses to their customers.

It's unclear what the final version of an immigration reform bill will look like. "The [House of Representatives] version is likely to be less onerous," says Bendor-Samuel. "But what will happen in committee? It's a bit of a crap shoot."

But the specter of sweeping visa changes is already having an effect, says Rutchik. "It's created a lot of uncertainty, particularly among non-U.S. outsourcing providers," he says.

"Additionally it has fostered a dynamic where providers are finding ways to do more work offshore because they don't have enough of a comfort level to bring offshore resources onboard to fill onshore roles. Ultimately it has had a reverse effect with fewer roles going to people onshore, even with respect to visa holders."

"In reality, most enterprises will simply do more offshore and work around the impact to their service delivery quality," says Fersht of HfS Research. "This legislation is unlikely to benefit more onshore employment in IT-which only has 3 percent unemployment in any case. If anything, it will drive more work outside of the country."


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