Wall Street Journal
By Joel Schectman
December 27, 2013
Both the politics and reality of immigration law cast a long shadow over IT this past year.
Firms struggled to obtain the tech talent they needed to stay innovative. And as the government cracked down on visa practices, cost saving benefits of IT outsourcing came into question. Amidst these challenges, corporate tech leaders are pushing for changes to U.S. immigration law, while looking for domestic alternatives to foreign outsourcing.
Hungry for employees with software development and programming skills, U.S. companies depleted the maximum allowance for foreign tech worker visas–65,000 H-1B visas for first-time applicants each year and 20,000 more for advanced degree holders — in just five days this past April.
Companies like Facebook Inc. and Google Inc. have said this limit, along with a shortage of workers in the U.S. with necessary skills, is slowing the U.S. economy. But smaller firms say that the paperwork burden of the applications puts them at a disadvantage to those tech giants.
Meanwhile the Senate, passed a bill in June cheered by the tech industry, that would nearly double the allowance for foreign tech worker visas, while sharply limiting the ability of foreign outsourcing companies to deploy staff in the U.S. If passed into law, the current cap on H-1B visas would rise to 115,000, and could go as high 180,000 depending on economic conditions.
If that bill became law, it would all but stamp out the ability of Indian outsourcers like Infosys Ltd. and Tata Consultancy Services Ltd. to access the same visas. While these firms are best known for doing U.S. IT work in India-based centers, their model also relies on the ability to deploy some workers onsite to consult with clients and coordinate with offshore employees. The offshore providers complain that U.S. firms are given unfair advantage, despite tapping the same pool of Indian staff.
Indian outsourcing firms also suffered a major setback after megaoutsourcer Infosys was slapped with the largest-ever immigration fine over allegations of visa fraud, as part of a settlement with the government. The U.S. said the firm improperly used travel visas to bring workers into the U.S. and place them in companies for longer term positions. Infosys denies committing fraud.
The $34 million settlement and the two year long investigation into the company was more than a setback for Infosys. U.S. officials said the investigation’s findings have caused them to more closely scrutinize Indian workers seeking entry into the U.S. Analysts say that greater scrutiny means delays and additional costs for IT projects.
Fran Karamouzis, a Gartner Inc.analyst, said that in 2012 the average lead time to bring on outsourced IT staff workers onsite was two to three weeks. That number is now nearing six to eight weeks, she said. “This means missed dates, additional expense and lapsed deadlines,” Ms. Karamouzis told CIO Journal in an October interview.
In 2014, the greater lead time may mean a boon for smaller U.S. based outsourcing companies, like Systems In Motion LLC and Rural Sourcing Inc. that have already begun to see an uptick in business. These firms have higher labor costs than offshore rivals. But analysts say that because they are smaller and domestic they can offer work that’s more customized.
Still, that may not help CIOs depending on Indian outsourcers for long term projects that are already in the pipes. The final shape of immigration reform still remains to be seen. But in 2014, CIOs that rely on Indian firms may need to learn how to complete projects with fewer outsourcing staff onsite. Otherwise they may have to accept higher cost if those outsourcers are forced to bring on U.S. staff.
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