IT service providers who remain dependent on H-1B visa holders could see their costs rise as much as 20 percent or more and see their margins take a four to six percent hit if significant reforms are made to the program, according to analysis by Everest Group. But that, too, will take time. “We expect these cost increases to take two to three years to work through the system as the existing inventory of H-1B and L1s are utilized,” Bendor-Samuel says. “However, these cost increases come at a bad time for the industry, which is facing slower growth, and increased price competition. This is further complicated by the rotation into digital service models, which demand greater proportion of work onshore. The net effect of these changes will likely be a reduction in the advantage the Indian service providers enjoy over their U.S. competitors.”
A small step forward, but a step forward at least for H-1B
The executive order is too small a step forward, according to H-1B critic Ronil Hira, but a step forward nonetheless. “It acknowledges that a problem exists and asks the agencies to suggest changes to improve the program,” says Hira, associate professor of public policy at Howard University and author of Outsourcing America. “The real question is whether the agencies will follow through with substantive improvements to the program. It's too early to tell what this means for the H-1B program.”
The executive order may drive employers to view H1-B visas more narrowly and with more scrutiny, predicts Rutchik. But that could result in fewer jobs for American IT workers, according to some industry watchers. “Where they may have previously identified a stellar foreign national candidate for a position and applied to bring them onboard, with the new risks of extending the hiring process and jumping through more hoops, they may choose to look elsewhere for talent,” says Rutchik. “In this way, it may be a positive outcome for U.S. workers, but the capabilities and skills must be there in order for them to capitalize on the opportunity.”
If qualified American resources aren’t available, however, providers and enterprises will likely turn to accelerating automation investments to replace labor or expanding their offshoring initiatives. It’s unrealistic to think that IT service providers will abandon its use of foreign-born labor or offshore labor altogether, pay them significantly more, or hire U.S. workers instead, according to Brown. “Organizations may choose either independently or with their service providers to build up existing offshore resource pools in lieu hiring in the United States,” Brown says. “More importantly, limitations on access to labor—domestic or foreign – will further accelerate the adoption of process automation technologies.”
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