The recently-concluded first quarter results of the top-four IT firms followed the same narrative when the management talked about the issue of H-1B visa ban till December by the Trump administration.
On June 22, the proclamation signed by the US administration banned non-immigrant visas such as H-1B, L-1 and J-1 till December to address rising unemployment in the US. In addition, there is a possibility of this extending beyond December if the situation continues.
Milind Lakkad, Global Head - Human Resources, TCS, described the move as, “Unfortunate.” So did Wipro’s Rishad Premji during the recent annual general meeting. Pravin Rao, COO - Infosys and HCL Tech CFO Prateek Agarawl, too, pointed out that the move was unnecessary.
Of course, all of them stood their ground that they do not see any short-term impact, for they have been reducing their dependency in the US over the last few years by stepping by localisation.
Indeed, the US Citizenship and Immigration Services report reveals that the H-1B visa requested by and issued for these four firms reduced by more than to 50 percent since FY17. At the same time, these firms have been investing in building talent overseas. These four firms have more than 60 percent local workforce in the US.
So delivering projects or shifting resources based on clients in the US are unlikely to be affected, at least in the short-term. However, as uncertainties continue around student visas and changes proposed for the optional practical training (OPT) regime, Lakkad said that it might impact talent sourcing in the US in the long-term.
Let us understand this part a bit. Though the dependence has come down, Indian IT companies are still one of the largest beneficiaries of the H-1B visa.
If you look at the 85,000 H-1B visas issued every year, close to 20,000 are set aside for those completing higher education in the US. Even in the other 65,000, employees who have completed masters in the US get to participate, increasing their possibility of getting selected for the H-1B lottery.
Before getting selected for the H-1B, the majority of the graduates, primarily in the Science, Technology, Engineering and Mathematics (STEM) discipline, get temporary employment in the tech firms through the OPT programme in the US.
Majority of these students are international students and a significant number of them are Indians. There are close to 2.5 lakh Indian students pursuing higher education in the US.
If the US government is indeed planning to bring in further change in the OPT regime, the interest in pursuing higher education in the US would dwindle. It will impact both companies like TCS and also the technology development in the US, Lakkad added.
So that is why, be it student programmes or the OPT regime in the US , they are important for the tech and IT companies. Considering that the US continues to account for about 60 percent of the revenue for IT companies, hiring STEM talents in the US is critical for IT firms.
What is the likelihood that this would continue in long term?
Most executives dismissed that the move is unlikely to be continued for long term and is probably an election gimmick.
“I don’t think there will be a long term view in mind since they are not sustainable in the US economy itself. Lot of it is coming from elections in November and these are knee-jerk reactions,” said Prateek Agarwal, CFO, HCL Technologies.
But if it does, will it change the current model? It might.
Increasing acceptance of remote working models and enough localisation would help companies. Offshoring, moving project allocation from expensive countries like the US to the low-cost locations like India would gain momentum.
V Ramakrishnan, CFO - TCS, pointed out that the company like TCS has always found a way and the distributed agile model (remote working) would help.
“But, is it the most optimum way to do it? Perhaps not,” he said.
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