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H-1B lottery: Why a loss for Infosys, Cognizant will be a gain for tech startups

As the US moves from a lottery based H-1B system, startups from across the world headquartered in the US are going to benefit more

May 03, 2017 / 01:22 PM IST
The fee hike is set to be implemented from October 2, 2020

The fee hike is set to be implemented from October 2, 2020

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I'm travelling in the Bay Area, in a cab driven by a woman software tester. She says she has been out of job for months now and driving a cab is the only way she can pay her bills, living just outside of San Francisco.

My company is looking for coders and testers but in Asia, I inform her. "A lot of coders from India have taken up jobs here, and are willing to work cheap," she tells me. Seated at the back, I couldn’t spot whether she was sarcastic, disappointed or angry.

Even as I take her email id, promising to inform her if I hear of any opportunity, I could only empathise with her.

While shopping with a friend at a CostCo, roaming on the Embarcadero or while eating lunch at GooglePlex, I realise that every third face is an Indian. Not a bad mix, I muse as I savour the various state foods of India in Charlie’s cafe at the Google headquarters.

The words of the cab driver were still pinching me somewhere, as I felt helpless about her condition.


Why Indians dominated the Bay Area tech industry

Earlier, on a flight from New York to San Francisco, the person on my adjacent seat, happened to earlier own a beer joint in Palo Alto. "Mark (Zuckerberg) and his colleagues used to hang out at my bar often," he told me.

Asking me where I was from, he said the biggest homes and best cars in Bay Area were owned by Indians. I asked where he was from — he said his parents came from Italy.

I realised that everybody in this country was an immigrant if we traced second or third generation, including President Donald Trump and his wife Melania Trump.

In San Francisco, meeting a lot of tech startups including those at Dave McClure’s 500Startups, I am appalled by the lack of black faces in the tech startup industry. I met only one, out of the 30 odd companies I met. "Some of it is due to the lack of skills, some of it is because of discrimination," I'm informed by a friend living in the US for 40 years now.

"Indians were the blacks in the 1990s. I myself faced this discrimination," Vivek Wadhwa, a professor at Stanford University told me at an Oakland cafe.

Also read: Trump amends H1B rules, entry level techies to be hit hardest

"With the emergence of Indians at the helm in the tech industry, now the tide has turned. Most tech startups want to hire Indians – firstly, they are hard-working and secondly they possess the requisite tech skills," he tells. "Indians are the new whites in the tech industry now," he remarked.

The rise of Satya Nadella and Sundar Pichai to the helm at Microsoft and Google did help.

But is the tech industry here helmed by Indians, interested in solving the problems of the developing world? "Sadly no," says Wadhwa, just back from a trip to New Delhi, where some of his family resides.

On an H-1B, can’t start a company

I also met a few Indians, who just got approved for a green card, and had started a company. On an H-1B visa, foreign workers are not allowed to start a business.

Thus, those who wish to go by the rule, wait years to get a residency status and start a company. This person, an alma mater from BITS Pilani, waited for over a decade.

Though some Indian tech entrepreneurs who wish to call America their home, have migrated the headquarters of their companies and thus sponsored themselves on either a L1 visa or a H1 visa.

"The practice was rampant, but not now so much," a former colleague tells me. His brother started an IT outsourcing company which sponsored him for a H-1B visa and later a green card, in the 1990s. He is back to India, running his IT business from Kerala.

When culture, besides cost starts playing a role

Donald Trump’s new H-1B guidelines have named companies such as Infosys, TCS and Cognizant who the White House has said were misusing the H1-B lottery system.

"Top recipients of the H-1B visa are companies like Tata, Infosys, Cognizant — they will apply for a very large number of visas, more than they get. By putting extra tickets in the lottery raffle, if you will, and then they’ll get the lion’s share of visas," a senior US administration official said. Trump has thus directed his administration to do away with the lottery system.

This might benefit the tech startups which hire in small numbers compared to the big IT outsourcers who apply for visas in thousands. However, does hiring from a foreign land become imperative for Indian tech startups based in the US? Is cost the only factor at play here?

"One issue that startups face in scaling up business in their early days is (consistency of) culture. That's the reason of me moving here," explains Abhinav Asthana, co-founder and CEO of Postman, who is based in Bay Area on a L1 visa.

Asthana’s company has about 10 employees based in the US, and only he is on a work visa/ permit, the rest being US citizens. He has clients has such as AMC Theatres, Clarifai, and BigCommerce. Other Indian tech startups which have opened offices or moved headquarters to the US are Druva and Freshdesk.

Gaining the lottery system was easy. Apply more, and you stand more chance of getting a cheap worker placed offshore.

Consultants in Bay Area also took advantage of it and placed a worker from India from one client to another. The workers got tied as bonded labor to the system and to the employer who could easily exploit them.

Tech startups from Israel, Japan, China, India or Germany which needed to fly key staff to set up a base in the US, lost out in the raffle. They would apply for just one or two visas and would never win the lottery.

Doing away with the luck based system and focusing on merit as well as wages, would benefit the startups around the world, looking to expand to the US. Big IT companies would rather now offshore work to cheaper destinations than hire expensive labor onshore. This would also help drive innovation as talented scientists, designers, architects and other specialists would often lose out as large IT corporations would flood the raffle with their applications.

Clearly, as US moves from a lottery based H-1B system to a more merit-based program, startups from across the world headquartered in the US are going to benefit more, in attracting global talent to Silicon Valley than the big IT outsourcers.

It will also alleviate the pain of American software programmers who get disadvantaged as they get replaced by cheap foreign workers.

(This is an opinion piece)
Harsimran Julka
first published: Apr 24, 2017 01:20 pm
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