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Infosys visa fraud settlement could impact IT offshoring model and customers

Stephanie Overby | Nov. 1, 2013
An agreement by the Indian IT service provider to pay $34 million to settle claims of visa fraud and abuse could force more outsourcers to reconsider their business models.

"Offshore IT companies have been circumnavigating visa legislation for decades," says Ken Behrendt, CEO of Eden Prairie, Minn.-based Eagle Creek Software Services. "I formerly led an offshore IT services company and saw countless examples of companies manipulating or simply breaking the law in regards to visa policy. A fine of this size will serve as a deterrent for other companies and will likely impact the way they attempt to bring foreign workers into the U.S."

Obtaining temporary visas had already become more challenging. "Immigration policy is being enforced at entry now, which is causing more confusion and disruption for clients," says Esteban Herrera, partner with outsourcing consultancy Information Services Group (ISG). "We have many anecdotal stories of resources assigned to client engagement not being allowed in the country because of visa status or not having a workplace address."

The Infosys settlement may finally force outsourcing providers to explore alternative methods of project delivery — including ways to move more work offshore, says Fersht of HfS Research. "They will look to employ more local U.S. staff to support clients and also invest in more experienced staff domestically so they can take on more work in India as opposed to the U.S." It may be too costly and complex to bring offshore resources onshore, agrees Michael Kushner, managing director with outsourcing consultancy Alsbridge.

Infosys Investigation Proves Indian IT Providers Are Being Unfairly Targeted
But the investigation of Infosys — following proposed H-1B visa changes in the Senate that would have significantly more impact on Indian companies than U.S. multinationals — is further evidence that Indian IT providers are being unfairly targeted, says Dr. Norman Matloff, computer science professor at the University of California at Davis, "Abuse of work visas and other nonimmigrant visas pervades the entire industry," Matloff says. "It is not limited to the 'rent-a-programmer' firms such as Infosys. Focus on such firms amounts to scapegoating, meant to draw attention away from the much more general problem."

The finding against Infosys could also fuel those factions that were supporting the tougher immigration laws and general sentiment against offshoring. "Earlier there were expectations that there would be substantial dilution in the clauses, but this incident may work against such possibilities," says Iyengar.

"Congress needs to determine whether to increase availability of H1-Bs and L-1s because it meets the needs of U.S. companies, allows them to be more competitive globally, keeps costs down which in turn keeps prices down for U.S. consumers or recognize that this 'landed' dynamic (even when proper visas are used) is really a way to undercut U.S. workers and not allow it for outsourcing providers," says Rutchik.

 

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