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| US protectionism measures make SMEs in IT sector jittery |
| Swati Garg / Kolkata Aug 18, 2010, 01:15 IST |
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Mounting protectionism in the United States has left many small and medium enterprises (SMEs) in the information technology (IT) industry in a quandary. For them, this means their profit margin would shrink further.
“The importance of US-based exports arises from the fact that in 2009-10, estimated revenues for the Indian IT-business process outsourcing (BPO) industry would be $73.1 billion, out of which $50.1 billion would be from exports. Of these, 65-70 per cent goes to the US,” said a National Association of Software and Services Companies (Nasscom) spokesperson.
The Border Security Bill, signed by US President Barack Obama last week, proposes to increase H-1B and L visa fees by $2,000 per application for any company, with at least 50 employees and where the percentage of US workforce is less than 50 per cent.
“Although rise in visa costs and other protectionist stance by the US will have an adverse impact on the overall IT sector, one should expect that the worst hit will be the small and medium players because they tend to function on slim margins,” said Angel Broking IT analyst Harit Shah.
According to industry estimates, an increase in visa fees would mean companies would have to shell out up to $250 million annually on visa costs, as roughly 70- 80 per cent of onsite workforces in the US are on temporary work visas. “Visa fees have been approximately doubled, which may have a near-to-mid term impact on margins. In the current scenario, when companies are struggling to find ways of growing margins due to increased wage expenses, this will be a challenge,” said Girsh Wardadkar, president & executive director, KPIT Cummins.
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