Visa suspension likely to cause minimal disruption for Indian IT firms

Recessionary environment, travel restriction to minimise the impact to a large extent

The US decision to suspend the non-immigrant visas till the end of this year is unlikely to affect Indian IT services companies in the near term, though the industry is awaiting several clarifications on the issue.

According to industry watchers, a tepid demand environment owing to the Covid-19 pandemic and travel restrictions have made the outcome of this decision less adverse than in normal times.

“The short-term impact will not be much as even employees are not keen to go the US given the global pandemic. However, it adds to the uncertainty in the non-immigrant visa regime by setting up such precedent,” said Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting.

The global IT industry is going through a lull with no new projects coming up as enterprises go slow on discretionary spending. This has led to lower utilisation of manpower already stationed in the US. On the backdrop of falling demand, most Indian IT firms have also reduced their dependence on external workers by employing fewer subcontractors.

“New projects are scant in supply due to Covid. In the absence of new projects, the requirement of new staffers under the H-1B visa is also less. So, this suspension will not have much impact in operational term on Indian IT services firms,” said Sanjeev Hota, head of research at brokerage firm Sharekhan.

Even dependence of Indian technology firms on the non-immigrant visas have come down drastically over the years as most firms have local hires to execute projects in the US.

As per a report by Kotak Institutional Equities, Wipro had the highest localisation ratio of close to 70 per cent at the end of FY20, while it was 68 per cent of HCL Technologies. Out of the total employee base of Infosys in the US, around 63 per cent are local Americans, while it stands at about 45 per cent for Tech Mahindra.

“In the normal course, impact of the (visa) suspension could have been material. However, the impact can be contained due to reasons such as recessionary environment, travel restriction and aggressive localisation,” the report by Kotak Institutional Equities, said.

However, HR experts said while the temporary suspension of visas may not cause much operational issues, firms will incur additional expenses in redeploying their visa holding employees who are currently outside of the US and can’t go back as per the executive order.

“Companies will have to look at deploying the resources who are currently outside the US in billable projects, which may lead to additional expenses for the firms. Secondly, those employees may have to undergo financial loss as salaries are likely to come down when they start operating from India or outside of client geographies,” said Aditya Narayan Mishra, director and chief executive officer at CIEL HR Services.

Even the price that the companies charge the clients may also come for renegotiation in case these employees start working from remote locations outside the US, added Mishra.