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Visa denials by US a nuisance for IT firms

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are not losing sleep over the recent report of spike in in the and category, as they have been dealing with high visa denial rates since the last two years.

“It is a concern for us, but is a manageable one. Since the rejection rate is quite high in case of L1 visas than H1, it is a big concern for companies that use more of L1s. As far as is concerned, we use more H1s than L1s. Also, we have started hiring locally, and the number of workers hired every year range between 1,000 and 1,500,” said V Balakrishnan, CFO and Member of the Board, Infosys.

In FY 2011, 63 per cent of all L-1B petitions received a ‘Request for Evidence’ and 27 per cent were issued a denial. This means adjudicators denied or delayed between 63 per cent and 90 per cent of all L-1B petitions in 2011. The denial rate for India-born applicants for new L-1B petitions rose from 2.8 per cent in FY 2008 to 22.5 per cent in FY 2009. The Citizenship and Immigration Services denied more new L-1B petitions for Indians in FY 2009 (1,640) than in the previous 9 fiscal years combined (1,341 denials between FY 2000 and FY 2008), said the report from National Foundation for American Policy (NFAP).

“I do not think this is a crisis signal for the industry. But yes, it is a concern. It is not that visa denials have happened overnight. We have seen this going up over the last two years, and IT firms have devised business models that take into account such hurdles,” said Ganesh Natarajan, Vice-Chairman and CEO, Zensar Technologies, and former Chairman, Nasscom.

Some of the steps that Indian IT firms have put in place to overcome the hurdle include filing of higher number of applications for visas on an annual basis, hiring more locals and a pushing for offshoring of work.

For instance, Tata Consultancy Services (TCS) had changed its visa strategy. has reduced its dependency on L-1 visa category due to higher rejection rates, and increased its application for H1-B visa. For the calendar year 2011, TCS applied for 4,500 H1-B visas, which is significantly higher than the 1,500 H1-B visas applied for in 2010.

“This has been happening since the last two years. What many do not understand is that this restriction, most of the time, is counter-productive to the US. While the intent is to make it difficult for firms to get visas, this results in clients preferring to shift work offshore. Rather, the industry should just brace itself for some more of such negative news as US prepares for election this year,” pointed out Partha Iyengar, Vice-President, Distinguished Analyst, Regional Research Director at Gartner.

More importantly, Indian IT firms over the last two years have also increased their hiring in local markets as they focus on getting bigger share of client wallet. For instance, in case of TCS, the component of onsite work has moved up from 42.5 per cent in third quarter of FY2010 to 45 per cent in Q3 of FY12. Similarly, in case of Infosys, onsite contribution of revenue has gone up to 49.5 per cent in Q3 of FY12 from 46.1 per cent in the third quarter of FY2010.

Wipro that hires around 3,000 locals in the US intends to increase its local hiring significantly over the next few years. Wipro said that it was making all efforts to increase the percentage of local employees in the countries it operates to about 50 per cent in two-three years, against the present 38 per cent. In its Atlanta development centre in the US where it employs 600 people, about 60 per cent are local Americans, said company sources.

In case of TCS, the company has gone ahead and started recruiting directly from the US campuses. At present, the company has a total of 4,700 employees in the US. Of these, 2,500 are on the roll, around 2,200 -2,300 are business associates (people hired on project basis). Infosys on the other hand said that it plans to hire 500 locals in just one quarter (January-March).

“The company takes the help of local sub-contractors to get only specific skillsets if it is not available internally,” said a senior Wipro official. This comment is further corroborated by the fact that individual company expenses on sub-contractors have gone up.

In case of TCS, expenditure on sub-contractors increased from Rs 1,262 crore in 2009-10 to Rs 1,836.5 crore in 2010-11, an increase of 45.5 per cent. In case of Wipro Technologies, the expenses for sub-contracting (including technical fees and third-party application) rose 31.8 per cent to Rs 2,615 crore (consolidated) in 2010-11 from Rs 1,984 crore in the previous year. Meanwhile, overseas expenditure on sub-contracting was up 60 per cent to Rs 939 crore. Similar is the case with Infosys. The firm’s aggregate expenses for technical sub-contractors almost doubled to Rs 603 crore from Rs 372 crore in 2009-10. (These figures are disclosed by firms only in their annual report).

“Indian firms are hiring green card holders, American citizens of Indian origins, or even local Americans. They are also hiring a lot of people locally on contracts from independent sub-contractors. Earlier, these people were costlier, so companies were not hiring them much. One look at websites like Dice, an American job portal, will make you understand the skillsets available. In certain cases where companies require advanced skillsets in some products like SAP and Oracle, it is easier to find such skillsets locally in the US than in India,” said Kris Lakshmikanth, CEO and MD of Headhunters.

This is not all. At the recent World Economic Forum, Vineet Nayyar, CEO of HCL Technologies, said the company intends to hire around 7,000 locals in Europe. Infosys has moved its HR head, Nandita Gurjar, to the US as it is beefing up its campus hiring strategy.

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