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US Congress may push India's IT firms to Mexico with H-1B crackdown

Patrick Thibodeau | July 28, 2009
If U.S. clamps down on visas, India's alternative may be Mexico and NAFTA

FRAMINGHAM, 27 JULY 2009 - As Indian firms fight the threat of H-1B restrictions, IT services companies might not leave their fate to politics. In an effort to reduce their need for visas, they may look to increase their presence south of the border.

Indian IT firms have boosted operations in Mexico in recent years to serve Latin American and U.S. customers. One advantage to doing so involves the North American Free Trade Agreement (NAFTA), which enables Mexican and Canadian professionals to work in the U.S. without an H-1B visa.

In other words, Indian firms could send employees to Mexico, and then move some of their Mexican workers to the U.S. under the auspices of the treaty. The Mexican workers would not need an H-1B visa to work in the U.S., though they would need what's called a TN visa. That visa is available to Mexican and Canadian nationals who qualify under a number of professional categories and meet specific education and experience requirements.

If Indian companies set up a visa safety net in Mexico it will be because of concerns about legislation from U.S. Sens. Chuck Grassley, (R-Iowa), and Dick Durbin, (D-Ill.). Of particularly concern is the bill's so-called "50-50" rule that limits the number of workers on H-1B or L-1 visas to half of a firm's total U.S. headcount. The majority of Indian companies in the U.S. have far more people working with visas than not.

The NAFTA benefit -- essentially allowing Indian companies to move relatively lower cost workers in and out of the U.S. without the H-1B visa -- was cited this week by Phaneesh Murthy, president and CEO of IT services firm iGate Corp., in Fremont Calif. IGate has the majority of its 6,500-plus workforce in India.

Murthy told analysts during an earnings call that U.S. visa restrictions could prompt his company to increase work in Mexico.

"We will probably utilize a higher growth in our Mexican center by having more people come from Mexico to the U.S., where they don't need the H-1B because of being part of NAFTA," said Murthy, according to a transcript on the financial site Seeking Alpha. "So, I think our business models will change and we are ready for those changes in business model," he said.

Many of the major Indian firms have operations in Mexico. MexicoIT, an industry group in Mexico City, said there are 500,000 IT professionals in the country, with another 65,000 graduating each year from colleges with degrees in IT-related skills. While costs are higher in Mexico than in India, Alfredo Pacheco, CEO of MexicoIT, said the difference is only about 10 per cent to 12 per cent.


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