‘Capping’ the American dream

DQW Bureau
New Update


The Indian IT industry has been surprisingly calm and quite over the issue of slashing of H1B visa quota. Interestingly, while the media has been crying hoarse on the issue, the IT chieftains are of the opinion that the deci-sion won’t hamper the bottom line of the companies. In fact, many of them think the deci-sion would give the much-nee-ded boost to the offshore busi-ness in India.

While, what the IT bigwigs claim may be true to some exte-nt, it might not be the absolute truth–the picture on the other side of the coin being entirely different.

While the announcement will have major impact on most of the visa related issues, pro-minent among them is the aff-ect on HR deployment flexibi-lity of Indian service providers, especially since alternative routes like L1 visa is also expected to be monitored more strictly. This could lead to a situation where there would be a push towards greater off shoring to get around the issue or a pressure on the US govern-ment from local industry to ease the restrictions if they face a shortage of employable talent locally.


According to Nandan Nile-kani, CEO of Infosys, “It is cer-tainly one of the key issues that needs to be monitored in the next few quarters along with rupee appreciation and the discontent with outsourcing.”

Insists Gartner India Princi-pal Analyst, IT Services (India) Ravindra Datar, “Push for grea-ter offshore components might increase, though it is not as if it will be an automatic decision to send more work offshore. Indian service providers will have to work harder at convinc-ing their clients to send more work offshore.” Ramlinga Raju, Chairman of Satyam also ech-oed the same view when he said, “ While there may be a backlash at an individual level, most businesses are very clear that offshoring is positive for their companies and also to the US economies as a whole.”

Another fall out, experts suggest is that Indian compa-nies would be forced to explore alternative ways of sending professionals abroad on L1 visa. However, most of them agree that it cannot be a direct alter-native to H1-B in anyways.


While companies are using it as the best possible alternative in the circumstances, its over use may lead to a more stringent monitoring by the US govern-ment, lest it defeats the pur-pose of reducing the H1-B quotas.

Interestingly, a McKinsey study shows that for every $ 1 worth of outsourcing job done by an Indian company, $ 1.12 to $ 1.14 worth of value is crea-ted for the US economy.

Another statistic suggests that during the current year, despite the ceiling of 1,95,000, less than 80,000 have been used. This clearly indicates that demand for these visas is based on the economic needs of the US and this program is not a means for importing low-cost foreign professionals.


According to Vivek Paul, CEO, Wipro, “Lowering of cap on the H1B visas will have immediate impact, as the visas (already issued) are valid for three years and are extendable by three more years. We would like the visa cap to be high eno-ugh to allow market forces to decide the number. Under cur-rent circumstances, 1,95,000 is clearly underutilized, while 65,000 is too low.”

The country’s apex body for software and services, NASS-COM has meanwhile suggested a ‘professional services visa’ under the WTO regime, which will facilitate the movement of professionals. The objective is to try and evolve visas that are appropriate for the software industry, which would not require any artificial limits.

Going by the numbers from top Indian IT companies, Info-sys currently has around 4,800 employees on H1Bs and 1,800 on L1 in different geogra-phies–54 percent of them in US only and there are some more H1Bs in the pipeline as well. Similarly Satyam has nearly 2,000 employees work-ing onsite in the US only. This clearly shows the onsite depen-dence of software companies and means that the reductions in H1B visas would not only effect business onsite but there would be billing pressure on Indian companies as well.


While many analysts beli-eve that the high-tech indu-stry would turn around within the next year and the cap sho-uld have indefinitely stayed at the previous levels, others allege that the US government has its own vested interest and apprehensions also as far as outsourcing to India is concerned.

A look at the background and things seem to fall in the right perspective. After heavy lobbying by businesses that wanted to raise the cap on the number of H1B visa approvals, in 2000 the US government had raised the limit from 1,15,000 to 1,95,000 for years 2001-2003. However, the cap was set to drop to 65,000 in 2004 beca-use the US government felt that while high tech automation was reducing the number of job, the most qualified foreign applicants were filling up the fewer available positions lea-ving no scope for local employees.

With a massive number of high-tech ‘native’ employees out of job, it was not only beco-ming tough for the government to justify the hiring of foreign workers, the Bush administra-tion was also losing its popu-larity over the issue with couple of suicides aggravating the situation. Hence the easiest and the most logical political move for the US government, and for that matter any government, was to shut the doors for for-eign talent so that the local companies would be forced to recruit locally.

No doubt the H1B cut might now see more of those few jobs being filled up by US citizen, however, by doing so the US government has also forced the industry to willingly ‘miss’ out on the oppo-rtunity to select the best talent from across the globe. Whether or not the US indu-stry can sustain itself without them is something only time will tell.

Rahul Gupta