The H-1B visa issue and talent crunch in the US have made Indian IT majors look at alternate solutions such as low-cost nearshore facilities in countries such as Mexico, to tackle the problem.
Nearshore facilities are those which are in low-cost locations close to the client and are cost-effective in the long term.
Within the US, Indian IT companies are also looking to hire and train talent in states like Idaho, which are cheaper than California or New York where most of their clients are based.
In Europe, IT companies look at locations in eastern European countries such as Hungary and the Czech Republic where the companies are close enough to their clients but are cost-effective.
NIIT Technologies is investing in low-cost nearshore facilities, where it is stepping up hiring. Arvind Thakur, Vice Chairman and Managing Director, NIIT Technologies, in a recent interaction with Moneycontrol, said, "Overseas hiring is going to increase going forward, especially digital where engagements are more onsite."
"What we have done is we have set up nearshore facilities in our overseas geographies. A lot of hiring happens in those facilities," he said. The company has a facility in Boise, Idaho— an area, which has good talent engaged in digital work available at a relatively lower cost, according to Thakur.
Cognizant opened a nearshore centre in Budapest, Hungary to cater to its European clientele, a few years back. Infosys has its nearshore facility areas such as Brno, Czech Republic and Mexico.
But having a nearshore facility by itself is not enough to address the talent crunch problem. R Srikrishna, CEO, Hexaware Technologies, in a recent interaction Moneycontrol said, “The way we think about it is not H-1B in isolation. I think there is a broad-based talent availability issue in the US.”
According to a report Talent Shortage Survey in the United States by ManpowerGroup, close to 46 percent of employers in the US have difficulty finding a skilled workforce. The report points out it is the large companies that have difficulty filling in roles more than mid-size and small-size firms.
This is having a significant impact on the Indian IT firms. Companies are seeing their margins shrink as the sub-contracting cost rise. HDFC Securities said in a statement that TCS' subcontractor costs increased by 33 percent year-on-year to Rs 2,822 crore for the third quarter last fiscal, while Infosys’ sub-contracting cost rose by 55 percent (YoY).
Srikrishna said, “We put together a number of action plans to create talent in the US to address the issue.”
Apart from better compensation packages, the company hires talent outside the US to skill and onboard. The company has a similar project in Mexico. “Mexico has a visa category called TN visa, which is quite frictionless. We are doing skill creation in Mexico for the US market,” he added.
Peter Bendor-Samuel, Founder and CEO, Everest Group, a consultancy firm, said however there is a catch. He explained that while the Indian firms are investing in training the US campus hires, there is a problem of attrition as other companies are vying for talents that are trained and short in supply in the US.