The fee hike was supposed to encourage Indian firms to hire Americans. But could the hike spur more offshoring?
The visa fee hike, part of the new border security appropriations act, is definitely stirring things up in the outsourcing world. I wrote about the fee hike a week ago (you can read that here), and it was signed into law as part of the border security act by U.S. President Barack Obama on Friday, Aug. 13. The H1-B and L-1 measure stipulates that any company employing more than 50 workers in the U.S. must pay $2,000 more for an H-1B visa application and $2,250 more for an L-1 visa application if more than half of its U.S.-based workers are non-citizens. Those new fees come on top of a $320 filing fee, a $500 anti-fraud fee and a $1,500 American worker training fee.
The measure was co-sponsored by Sen. Charles Schumer (D-New York) and Claire McCaskill (D-Missouri), and the money raised from the higher fees is supposed to help fund the border-security act. And, Schumer intended to leverage the fee hikes as a way to force Indian firms that he says have been taking U.S. jobs to hire U.S. workers when they can.
Now for the aftermath. As I wrote, India wasn’t (and still isn’t) too keen on the fee hike. Nasscom, a group representing the software industry in India, has been very outspoken in its objections to the fee hike, calling it discriminatory. One day after the new fees were signed into law, Nasscom released a statement saying the leading Indian IT firms have plans underway for new business models that will “contain the impact of fee increase.”
Details are scant on these new business models, but Infosys Technologies says it is working on a model that puts most of the IT services it offers back on its shore. “In this kind of scenario, customers will come to us. We are already seeing this happening in case of large clients who have captives here,” Kris Gopalakrishnan, CEO and managing director of Infosys, said in a statement released by Nasscom.
Nasscom also stressed that despite the growing criticisms from the United States regarding offshore IT services, the United States continues to be the largest market for the Indian IT industry—and that while the fee hikes will impact India, it won’t severely impact that market. Infosys, for example, derives more than 66 percent of its revenue from North America including the U.S., Gopalakrishnan said in the Nasscom release.
Nasscom isn’t the only group to point out that the fee hike may not have Schumer’s (and others) intended consequences. Head over to CIO.com reporter Stephanie Overby’s fascinating article and learn how some think the increased visa fees could in fact encourage Indian IT service providers to move more work offshore or to nearshore delivery centers they’ve opened in Canada and Latin America. The trouble with that? “By further discouraging bringing talent to the states, Schumer and company are driving the next wave of IT development out of the country,” said Phil Fersht, founder of outsourcing analyst firm Horses for Sources, in Overby’s article.
Readers of this blog left some equally insightful comments after the post I wrote last week, and I enjoyed reading and considering everyone’s thoughts. Some of the comments that I thought were particularly provoking (and there were many) include this, posted by KLC:
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And here’s another well-thought point, from Don P:
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I hope to hear more, particularly about the argument that the fee hikes may not slow the ongoing trend to offshore IT, which ultimately can costs U.S. jobs and hurt our IT industry, and advancements, here.
