With fears of an Executive Order hitting India’s Silicon Valley, insiders say the only way to survive the storm is to redeploy and recast
~By Imran Qureshi in Bengaluru
US President Donald Trump has left many Indians uneasy. News of him likely to sign an executive order aimed at H-1B visas, 70 percent of which are cornered by Indians, has unnerved many. It also led to stocks of India’s top IT companies such as Tata Consulting Services, Infosys and Wipro, plunging to 4 percent and leading to a loss of around Rs 33,000 crore in their market valuation.
However, in India’s Silicon Valley, a different picture emerges of the dire prospects of this presidential order. It brought back memories of the challenges faced by the IT industry during the last two decades and surmounting them. These include the Y2K crisis 18 years ago and the US economic crisis which led to multi-skilling of the Indian coder. Despite campaigns during US elections urging hiring of locals, India’s software power has become akin to China’s manufacturing power.
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The presidential order, if it comes through, will raise the minimum salary cap for H-1B visas from the present $60,000 to $1,30,000. Insiders admit that the costs of the Indian IT sector will go up, impacting margins but this will also depend on the speed with which they can “reinvent’’ their outsourcing model.
There is no doubt that such an order would hit IT companies. A CEO of a top IT company said on condition of anonymity that raising the minimum salary cap would be difficult for any company. “It is physically not possible for any company to pay this kind of a salary. The current model of sending skilled professionals will not work. Companies would have to recruit locally.’’
Lobbying Only Option for India
The government has realised that Trump is in no mood to relent on implementing his campaign promises
More than the US ban on Muslim refugees, the Indian government is concerned about the executive order drafted by the Trump administration which imposes severe restrictions on the issue of H-1B visas. It is this non-immigrant visa that allows US employers to temporarily employ foreign nationals in “speciality occupations” including the computer and software sectors. Any curbs on H-1B visas severely impacts the Indian IT industry as well as these professionals.
“The executive order, if signed, has to be seen in conjunction with the Zoe Lofgren Bill tabled in the House of Representatives on January 20,” a source in the Ministry of External Affairs (MEA) told India Legal. “Should the bill be passed, it will change the way H-1B visas are issued in the long term. Indian software professionals and companies which have operations in the US would be severely hit by the new law. Our concern is primarily about the health of the IT sector.”
Of the 65,000 H-1B visas issued every year, 70 percent are cornered by IT professionals from India. US media reports put the number of Indians employed in the US on H-1B visas as anywhere between 3,00,000 to 3,50,000. The visa allows employees to work for a maximum period of six years and was introduced in 1990.
According to the official, the Indian government has already communicated its concerns to the US administration as confirmed by the Ministry’s spokesperson Vikas Swarup. The MEA is also preparing a special dossier reiterating and listing the anxieties of the IT industry.
India Legal has learnt that the MEA is not taking any “aggressive posture” as it did in March last year when it dragged the US to the WTO over imposition of increased visa fees for temporary workers on H-1B and L-1 visas. There is a realisation within the MEA that there is nothing the government can do other than lobby through diplomatic channels and influential NRIs. The strategy seems to be to gather support against the Bill in the House of Representatives or covertly back those legally challenging the legislation.
As for the presidential executive order, it has been informally conveyed to IT companies that it would be counter-productive to launch any offensive now. Says an MEA source: “The issuing of visas is the prerogative of a sovereign country and it would be unwise for the government to question that. Moreover, there is one view that it would be pointless stopping the President when he is in no mood to relent on implementing his campaign promises.”
However, it will be part of the government initiative to impress on the US authorities that Indian talent was actually helping US businesses grow and it would be against American interests to impose curbs. The US may now no longer be the favoured destination for Indian students who look forward to landing jobs there after completing their studies.
Gentle persuasion seems to be the option that will be exercised. At least for now. —Ajith Pillai
V Balakrishnan, former CFO, Infosys, said: “Doubling the wages will have a huge impact on IT services. It can be managed by reducing onsite deployment. For instance, currently, Indian companies have 70 percent work offshore and 30 onsite. This will have to be brought down to a ratio of 80:20 or even 90:10. Strictly speaking, with the new digital way of doing business, we do not require so many people onsite. New technologies that are being deployed are not manpower intensive. They are innovation intensive. Models will get re-invented because everyone knew it was coming. The centre of gravity will move towards India.’’
Models will have to change to retain growth. Rostow Ravanan, CEO of Mindtree Consulting, said that the industry would have to prepare for slower growth. “The current model of sending Indians to the US will not work. Companies would have to recruit locally in the US.”
Kris Lakshmikanth, CEO of Head Hunters India, goes a step further to say that the very nature of engagement would change. “Companies will begin to send only those professionals who are very critical. They will hire more from temporary companies (where services are given for, say, a project) or individual contractors locally in the US. Given the technologies available, it will be more appropriate to deploy non-techies who can market and deal with the business of software.’’
Priced H-1B Visas
- Of the 65,000 H-1B visas issued every year in the US, 70 percent are cornered by Indian IT professionals
- The number of Indians employed in the US on H-1B visas is between 3,00,000 to 3,50,000
- A bill in the US House of Representatives calls for the minimum salary for an H-1B visa to be doubled to around $1,30,000 per annum from the present $60,000
- The H-1B visa allows employees to work for a maximum period of six years
- It was introduced in 1990
- Export value of Indian IT services in 2016: $110 billion
- Annual growth of exports in 10 years: 16 %
- Export share: US: 62%; UK: 17 %; Central Europe: 11%; Asia-Pacific: 8%; Others: 2 %
Sources: ICRA and MEA
Manish Sabharwal, chairman, Teamlease Services, said: “Over a period of time, about 10 percent of the headcount in the US would come down to five percent if the visa order is pushed through. But, the advantage is that Indian companies will develop new competencies as they have done earlier. It will force us to increase headcount in India and develop processes. The wind is at the back of the software industry. The current number of 3.7 million IT professionals will only grow to 7 million in the next five years. But it is not a job crisis from any perspective.’’
So can the US survive without Indian IT professionals? Sandeep Ladda, Leader-Technology and e-Commerce, PricewaterhouseCoopers (PwC), said: “There is a huge demand-supply at play.’’ But the challenge, he said, was how Indian companies deal with issues in the immediate future if the order goes through. “There may not be simple solutions to negotiating pricing, for instance. Or, there could be some delay in who needs to be replaced. They may not have the machinery to hire people, and of course, not at $1,30,000.’’
That is not all. Indian companies will have to “accelerate technological innovations and look at acquisitions in the US,’’ said Raja Lahiri, Partner at Mumbai-based consultancy, Grant Thornton India.
Of course, everyone agrees that Indian IT professionals already in the US will not be impacted. But, just in case that also happens, Sabharwal quotes his 12-year-old daughter, Noor, who said: “It is good Trump got elected. All the Indians who made America great will return to help build India.’’
Lead picture: Indians during an event in US. Photo: www.prweb.com